£25,000 working capital for a client with CCJs
If you have clients in the retail sector, you will be fully aware of the challenges the industry faces. Competition from the internet and price-sensitive customers have forced many shops out of business.
There are some bright spots on the high street. Convenience stores have not been affected in the same way as many other retailers and many are thriving.
But the fundamentals of business finance remain, whether a business is profitable or not. Borrowing may be essential - especially when there are shelves that must be kept filled - and lenders can be reluctant to lend if a business or a business owner has a less than perfect credit record.
We recently helped an accountant whose client owned a convenience store find funding - when, thanks to a damaged credit record that included CCJs, most lenders would not help.
“I work with many small store owners. Here in the Midlands, the corner shop has been a feature of every street for generations. It means long hours and hard work, but the sector remain popular, particularly for members of the Asian community looking to run a family business.”
The accountant was approached by one of his shop-owner clients who was having problems with cashflow.
“He wanted to borrow £25,000 to buy in stock - customers don’t like to see empty shelves - and to brighten up the interior. He felt that his displays were not attracting customers or making goods look appealing.”
It should have been a simple enough loan to arrange - but the client was having problems, which the accountant soon saw. Debt levels in the business were high - the owner had taken out loans whenever he had run into difficulties in the past. The costs of repayments were taking a high proportion of what profit he was making - and preventing him from reinvesting in his business.
But there was an even more serious problem. The accountant's client had CCJs as a result of problems with the previous borrowing - which was making it all but impossible for him to arrange additional funding now.
Why does a CCJ make funding difficult?
A County Court Judgment or CCJ is a court order registered against individuals or businesses that fail to repay a creditor. The court will look at the case and can issue a judgment which will set out how the debt should be repaid. Failure to do so within 30 days will result in a mark on a credit record which will remain for six years.
Your client's credit records are, of course, used by lenders when they consider a loan application. A CCJ can be a warning sign of a business in distress and many finance providers will refuse to lend to clients with a CCJ registered against themselves personally, or their business.
The accountant had worked closely with us at Rangewell in the past - and approached us to find a solution.
How Rangewell helped
The accountant explained that his client still had the potential to be profitable - but that he needed to find a lender who could take over the existing debts - and who was prepared to work with a borrower who was able to deal with CCJs.
It may be possible to find funding for clients with a CCJ from a lender specialising in the sector - but some preliminary work will probably be required. We’ll work with you to understand why your client has a CCJ, and then help prepare a case to lenders. If we can demonstrate that the debt was the result of an issue beyond your client's control, rather than a fundamental problem with their business, the chances are we can find lenders who will listen and make the decision to advance the funds required.
We found a lender who was able to see the bigger picture and was able to replace all current lending with a single loan, which would be simpler to repay. £25,000 would pay off some existing debts and allow the client to bring in more stock, putting the business on a better footing.
Because of the CCJs, the cost of this rescue loan was high at 18% - but by spreading the costs of the loan over a longer term, the actual monthly repayments could be reduced.
At Rangewell we can help you arrange all types of business funding for your clients. It means that you can provide an even better service to them, and at the same time creating a potential additional income for your practice.