Recovery Finance
Updated: 6th March 2008 (AM)
THE STERLING BUSINESS RECOVERY FUND
Background
As Commercial Finance Brokers we receive regular requests to assist with raising finance to enable businesses and / or assets to be acquired from an Administrator, Administrative Receiver or Liquidator. This can be for a non-connected party, or for an existing management team under a "pre-pack" arrangement.
Our contacts within the "non status" lenders of asset finance, factoring and commercial mortgages allows us to source funders with the appetite for such deals. We can either act as "brokers" for the purchasers or advise and assist the acquirer(s) directly.
Traditionally, the issues with putting together a suitable package has been twofold:
1) Timing
It can take some time to put the funding in place, especially where there are a number of lenders. This can put the proposed transaction at risk due to:
a) an alternative offer for the assets and goodwill
b) the administrator or receiver not wanting to trade the business
c) customer base finding alternative suppliers
d) employees finding alternative employment due to financial uncertainty.
2) Funding Gap
This is all too common in most transactions. For the mathematicians:
(Mgt funds plus Debt Finance) < (Asset Value plus fees plus Goodwill).
This is nearly always due to the fact that either a) the management team have already lost most of their funds and have little contibution or b) a high value is placed on non fundable assets (goodwill, rent, ransom creditors or even stock).
The Recovery Fund Concept
Recognising these issues and coming up with a practical solution, the "Sterling Business Recovery Fund" offers the following solution:
i) Sufficient funds are loaned to "Newco", to acquire the assets and goodwill from the administrator /liquidator / receiver, immediately. Thereby significantly reducing the time period.
ii) Once the business has been acquired, as brokers, we refinance the assets (fixed assets and property), within a reasonable time period. The funds from the refinance repay the funds advanced.
iii) Any outstanding funds (in excess of that absorbed by a factoring/discounting facility) will be converted to a "mezzanine finance facility" and repaid as soon as possible post completion.
Effectively, we arrive at the same financial structure post deal (albeit a few months) that we would have liked to have in place on completion.
Our fund bridges the gap, relying on our ability as brokers, to refinance the assets post acquisition.
Source of Funds
These are provided on an exclusive basis to deals introduced by Sterling Capital Reserve. Funds come from a major financial institution (not a high street bank).
Our funding lines are practically unlimited, provided:
i) The deal works from a commercial viewpoint
ii) The business has a factorable debtor book
iii) The mezzanine finance layer is repayable within 9 to 12 months
iv) SCR can assure "the funder" that the debt bridged on completion can be refinanced post completion.
A Challenge for you!
We have proved over the last 2 years that this concept works.
To date the fund has been repaid all moneys it has loaned out
Can we assist you this year?
We can only help you, if you contact us!
Contact Us Online - or call 0115 984 9800.
