Commercial Loan Brokers in Coolum Beach

$500,000 Private Loan to a Commercial Electrical Business

How Loanright Financial Services Empowered a Coolum Beach Electrical Business with a $500,000 Secured Loan

Before the COVID-19 pandemic, a Coolum Beach electrical business thrived, serving residential and commercial clients with exceptional service. Like many businesses in the industry, the pandemic disrupted their momentum. Contracts slowed, payments were delayed, and financial strain mounted. Despite the challenges, the business showed resilience. As the market rebounded post-COVID, turnover and cash flow steadily improved. However, lingering issues, including costly self-sourced loans, continued to drain resources and hinder full recovery.

Adding to the complexity, the business had accrued $500,000 in tax debt, creating an urgent need for a financial solution. The business owner faced two options: consolidate their debts into a manageable structure or consider restructuring the business entirely. Given the signs of market recovery and improving prospects, consolidation became the clear choice.

The Financial Hurdle

With strong turnover and stabilising cash flow, the business qualified for a $500,000 loan. However, accessing an unsecured loan of this size posed significant challenges. While loans up to $250,000 might not require extensive documentation, larger amounts typically demand robust financials. Unfortunately, the pandemic’s impact left the company’s financial records showing losses, making unsecured lending an impractical route.

The Tailored Solution: Secured Loan with Capitalised Interest

Recognising these challenges, Loanright Financial Services crafted a tailored, two-step approach to deliver the financial relief and stability the business needed:

1. Secured Loan Backed by Property: A $500,000 first mortgage loan was secured, leveraging the business owner’s property as collateral. This enabled access to favourable terms and a lower interest rate than an unsecured loan could offer.
2. Capitalised Interest: Interest on the loan was capitalised, meaning it was added to the loan balance rather than requiring immediate periodic payments. This strategy provided significant short-term cash flow relief.

This approach delivered two critical benefits:

• Cash Flow Relief: By capitalising the interest, the business was able to allocate its available cash flow to immediate priorities, including reducing the $500,000 tax debt. This reduced the strain of servicing both tax obligations and loan payments simultaneously, allowing the business to stabilise operations.
• Future Flexibility: The capitalised interest structure gave the business breathing room to recover from pandemic-induced losses. As cash flow continues to strengthen, the business will be well-positioned to refinance the loan or explore unsecured lending options with more favourable terms.

Why This Loan Was the Right Fit

The combination of a secured loan and capitalised interest addressed the business’s immediate challenges while setting the stage for long-term growth. Here’s why this solution worked so well:

• Lower Cost of Borrowing: Securing the loan against property provided access to a lower interest rate, making the overall cost of borrowing more manageable despite the significant loan amount.
• Avoiding ATO Enforcement: Addressing the tax debt proactively through consolidation helped the business avoid enforcement actions from the Australian Tax Office (ATO), such as garnished accounts or liens on assets. This proactive approach allowed the business to retain control over its financial future.
• Improved Financial Outlook: The loan structure aligned with the business’s recovery trajectory. With turnover increasing and cash flow stabilising, the business is projected to be in a stronger financial position within a year. At that point, refinancing or transitioning to an unsecured loan will become viable options.

Key Benefits of the Approach

1. Preserving Cash Flow: The capitalised interest model allowed the business to preserve its cash flow for day-to-day operations and essential payments, such as tax obligations. This was vital for maintaining continuity and recovery.
2. Strategic Debt Management: By consolidating debts rather than restructuring the business, the owner retained full operational control while addressing financial challenges head-on.
3. Tailored to Unique Challenges: The solution was designed with the business’s specific needs and recovery timeline in mind. The first mortgage loan, combined with capitalised interest, struck a balance between providing essential capital and minimising short-term obligations.
4. Future Growth Potential: This strategy provided a clear pathway to financial recovery. Within a year, the business is expected to be far enough removed from pandemic-related losses to consider refinancing or obtaining unsecured financing on improved terms.

Conclusion

This case demonstrates how a strategically structured secured loan can provide both immediate relief and long-term benefits for businesses navigating post-crisis recovery. Loanright Financial Services’ expertise in crafting tailored financial solutions enabled this Coolum Beach electrical business to address its tax debt, stabilise cash flow, and prepare for a brighter future. By choosing consolidation over restructuring, the business not only resolved its financial challenges but also positioned itself for sustainable growth.

At Loanright Financial Services, we understand the unique challenges businesses face and the importance of solutions that enable them to thrive. Whether it’s navigating the aftermath of a crisis or planning for growth, we’re here to help businesses succeed.