April 16, 2019
Reparo Finance – Helping New Management Teams Get Started
Finance, General News
When a new management team is buying a business that has been put into administration Reparo can help find the right finance solution.
A manufacturing business was badly affected by a big change in the oil and gas industry and lost some major contracts. With significantly reduced revenues and little time to acquire complex new contracts, the business became insolvent and the directors decided to put it into administration.
A management team comprising new members and some of the old team was formed. The team wanted to purchase the business from the administrator. This would see the business set up under a new entity and continue trading — good news for employees, customers and some creditors.
The business needed over £100,000 in funding to purchase plant and machinery and provide the business with working capital. For the majority of lenders, this type of deal doesn’t pass their vetting process because the original entity failed to and the security is difficult to value. At Reparo we always take a closer look.
We took the time to understand the business and the new management team. After careful due diligence, we were comfortable that a loan was viable. Here’s how we arrived at this conclusion:
- Market Understanding: We understood the marketplace conditions that led to the administration. Our team knew of other businesses in the market that were also struggling and concluded that the business was largely a victim of external factors rather than poor management.
- Business Stability: Although the business was in distress it did have a loyal client base, previous stable performance and a good product that was in demand.
- Business Plan: The plan was sensible. The business needed to become profitable quickly and a combination of tight budgeting and new client acquisition to achieve this was very realistic.
- Good Management: The business had been well managed for a number of years, and the directors who are involved in the new management team have a solid track record. Also, the new member of the management team offered even more expertise and experience.
- Security: There was security in the form of the plant and machinery and personal guarantees. Alongside the other factors, this reassured us that a loan was sensible for both the client and us.
- Commitment from other lenders: A lender that had been working with the business previously was also extending a facility, and we were comfortable working alongside them.
Overall, when adding up all of these factors we felt able to provide finance. In situations where the due diligence process is time-consuming and complicated, we are the perfect finance provider because:
- We don’t apply rigid criteria to every loan; instead we look at the specific circumstances.
- We take time to understand the business case and people behind the loan to measure its viability.
- We can be flexible with different types of security as long as value can be confirmed.
If you are frustrated by the approach of other lenders that reject your application while seemingly not understanding your business, Reparo may be the solution.
In this case, the full loan went ahead which allowed the new management team to buy the business. The business purchase was a good outcome: a well-managed British manufacturing business was able to continue trading with a new and experienced management team. Employees retained jobs and the new entity was able to prosper.
The new entity used the capital wisely, cultivated new clients, and was soon trading successfully. The business just needed a finance provider that understood its circumstances and believed in the new team’s vision.
We are proud to help viable businesses access funding when other lenders aren’t willing to take a closer look. If you have a solid business case and need funding but aren’t succeeding with traditional lenders get in touch – we may be able to help.