The frustrated owners of an existing management rights business wanted to see if we could better their existing loan package offer from their current lender (a Top 5 bank).
In summary, two business partners wanted to buy out their third partner (60% owner) in a management rights business for an iconic accommodation franchise resort based in NSW. The two partners wanted to purchase the third partner’s share (60% of the asset) using only equity in the business.
The clients had previously worked with a banker based in NSW with little experience in the management rights industry. They spent 12 months in deliberations and $5,000 in legal fees only to have a deal offered by the bank that was unworkable.
Working with their accountant, we analysed the business case and examined all risks. At that point in time, only 2-3 lenders had a policy to address the complexity of the agreement – a rare 90-year management rights term.
To successfully secure funding for this business, we needed a bank and more specifically a bank assessor, with a thorough understanding of the nature of the business – otherwise the computer would literally say NO. Through my understanding of bank policy from a range of banks (not just one), and my own industry contacts, I knew which Qld-based banker with management rights experience would be able to apply critical thinking to the application.
This was a scenario that literally sat outside of bank policy but was an excellent deal and just needed a business finance broker with management rights experience to clearly outline the business case and its potential to the right lender.
A new valuation of the business was organised, as the original ($4m) was based on flawed assumptions. Again, only someone with an understanding of management rights businesses would identify this. The new valuation was $6m – a $2m differential.
By presenting a comprehensive loan application we achieved an interest rate that was 1.5% below the original bank proposal. The savings potential in $ terms was significant. #experience matters
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Green Finance Group Pty Ltd ACN 145 035 221 is authorised under LMG Broker Services Pty Ltd ACN 632 405 504 Australian Credit Licence 517192.
