£150,000 refinance for a client turnaround

New technology can disrupt a successful business - and many businesses have failed when that technology is disruptive enough. 

We recently worked with an accountant whose client of 30 years was forced into voluntary administration by changes in technology and business practices.

The challenge

His client was an electrical business which had been producing commercial lighting systems since the late 1980s. They had achieved real success and their products were being shipped around the world. Their accountant had been with them since their early days.

“I had registered the business with Companies House and helped them go from a two-man business that assembled outsourced parts into a real manufacturer with dozens on the workforce. But the steady growth came to a very abrupt end.”

The problem was the launch of LED lighting. By 2015, concerns about the environment and energy consumption were coming to the fore, and the business was suddenly finding that its products were no longer finding customers. With a warehouse full of unsellable and obsolete lighting equipment, the accountant showed them that voluntary administration was the only way to salvage anything from the business as it stood.

“I had to advise my client that the choice was either voluntary administration or bankruptcy. We helped him through the worst of it, finding an insolvency practitioner and trying to make a go of the turnaround - but after letting people go and disposing of assets, we saw that the only solution was to help our clients set up a new company.

The new business would take over the remaining assets of the business, the name - which still had some value in the sector - and, unfortunately, some of the debts.”

The partners had developed a new product range which would incorporate new LED lighting technology, but they would be coming late to the market - which had moved on. Worse, there were some outstanding debts with suppliers and issues with HMRC. The accountant was concerned that the new company still had obligations that could not be covered by their projected income.

“Bringing back a company from the brink - or, in this case, one that had in all practical senses already slipped over it, is always a challenge. We soon found that the problems were not over - because it was proving impossible to raise fresh funding. I had calculated that my client needed £150,000 to get back to profitability and pay off the remaining creditors - but no lenders seemed ready to help.”

The problem was that the problems of the old business were still affecting the creditworthiness of the new one. A CVA can be a vital tool in turning a business around, and it is possible to raise funding under a Company Voluntary Arrangement - but many lenders may prefer not to take the risk. 

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Our solution

All business lending decisions are based on risk. If a lender assesses a borrower as presenting an unacceptably high risk that they will not be repaid, they will refuse to offer a loan.

The majority of business lenders are cautious and set a low-risk threshold. They will simply not approve loans to a business while it is under a CVA - or to a company that has emerged from one.

At Rangewell, we have built close relationships with lenders throughout the business lending market. We know those who take a different approach to risk – and who may be prepared to advance the funds required.

When the accountant saw that a direct approach to lenders would not provide the funds his client needed, he came to Rangewell. We saw the potential in his client's business and contacted lenders who could share our view. By taking out a Bridging Loan on the client's home, we were able to raise the £150,000 required - which could be refinanced by the business in a year’s time when the client's business had retained profitability.

The funding Rangewell arranged:

£150,000 at just 1.2% 

Interest-only monthly repayment:  £1,500

At Rangewell we can help you arrange all types of business funding for your clients - helping you deliver an even better service to them, and creating a potential additional income for you. Simply contact us and our team can guide you through the process.