We first spoke with the client Tanya* after she was referred to us as a result of word of mouth from another client who we had recently helped with equipment and commercial finance.
When Tanya came to us she was under extreme stress with her BBQ Chicken retail shop, and in desperate need of help restructuring her business and the loans she was funding the business with. She had found herself in this position after completing considerable upgrades to the business and premises on the promise of financing by a local Bank. As a result, she paid for many of the upgrades and equipment on her own personal credit cards and when the Bank declined the business expansion loan she began to face a severe cash flow crisis. As a result, she approached us here at Awesome Lending Solutions.
After completing our due diligence, we discovered that the entire business debt was actually in the form of a line of credit facility against her and her husband’s home. As a result the family home was completely exposed in the event the business failed and also as the loan had not been split in any way there was a considerable tax liability that potentially existed due to the mixing of deductible and non-deductible debt.
After a lot of work understanding the client’s current business structure and requirements. We went about creating a structure that would be able to meet their requirements going forward.
The first step in the process was to have all of the kitchen ovens, dishwashers, refrigerators and dining area equipment valued, this cost just over $700 but was well worth it as it provided a valuable cost base for depreciation claims in their tax returns. In addition as much of this equipment was brand new we were able to use the opportunity to seek equipment funding. This allowed us to reduce the immediate cash flow drain – the credit card debts.
Once we were able to improve the credit card debt the next step was to seek business funding to repay the original Line of Credit loan used to purchase the premises and business. While the interest rate was marginally higher by 0.5% (about $110 per month) the fact that the majority of the debt was now secured by the business came as a great relief to Tanya. We are also sure it made the accountant’s job of claiming all of the business interest costs significantly easier and probably resulted in a lower accounting bill for her.
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* names have been changed for privacy reasons