Helping an optician who had run into deep financial problems: £30,000 refinance
All the information you need
Setting up an optician’s practice from scratch can be daunting. Premises and equipment will involve major costs, and with no established client base, a start-up will always be a venture with a certain amount of risk.
However, things may be a little easier for an established optician who is already running a successful high street practice. Setting up a branch can reduce costs compared with starting a new business from scratch - and lenders may be happy to lend when they can see evidence of an existing successful business.
But although many opticians choose this route to grow their practice, there are still no guarantees of success. We recently helped an optician find a solution when his new branch practice failed - leaving him with substantial debts, and CCJs which looked as though they would prevent him raising the money he needed to refresh his old business.
The Branch Challenge
The rewards of running a successful practice can be high - but sadly, not every business venture will succeed. A practice that runs from a single premises can show excellent returns - but there can be no guarantee that the same formula will provide the same success in a branch.
When a branch hits problems, it can have a negative effect on the whole practice.
We recently helped an optician who had been operating a highly successful practice in a Birmingham suburb since 1983 - but who ran into serious difficulties when he opened a branch practice in a neighbouring town centre.
He had arranged a £250,000 funding package from a leading bank to set up his new branch in 2015.
“I had a good position on the high street, and I believed I could simply replicate the success I had enjoyed with my first practice.”
He would be able to leverage his existing relationships with frame and lens suppliers, and he had looked carefully at the demographics of the area his new branch would be serving. He had also been careful with his equipment, using his experience and contacts to get a good price to equip the consulting room to a high standard. However, when he opened for business, he soon realised that there was a problem.
“People were just not coming in. I thought that this would not be a long-term problem and told myself that, once they realised we were there and that we were open, people would start coming in off the street.
I thought back to when I launched - that was a struggle at first. But the business has moved on in the last 30 years.”
The problem, he realised, was that the major franchised chains were in the area, and that they had the advertising spend to ensure new customers went to them - while many older customers were happy with their existing opticians.
“After a year of trading at a loss, I realised that the new business was never going to take off.”
He tried to sell the business as a going concern, and at first attracted some interest - although this took several months, while his losses mounted. He secured a low, but workable, offer from another group practice operator but, at the end of a long period of due diligence, the buyer's accountant advised against proceeding with the purchase at the last minute.
“Nobody wanted to buy an opticians which had never shown a profit.”
He had no alternative but to liquidate - and with a leasehold property, there was very little to recoup from the venture. With his original practice struggling after supporting the branch for almost two years, he was left with £200,000 outstanding from his original £250,000.
After he had missed a series of payments, he found himself facing a CCJ. This not only obliged him to pay back the loan, it effectively prevented him from borrowing any more money - which he now desperately needed to get his original practice back on track.
He turned to us at Rangewell to help.
What is a CCJ?
A County Court Judgment (CCJ) is a type of court order that might be registered against you if you fail to repay the money you owe. When you owe a creditor money they can apply to the County Court to register a judgement against you to claim it back. The court can issue a judgment which will set out how you will need to repay the debt, which can be as a lump sum or by instalments.
Unless you pay off a CCJ in full within 30 days, it will be shown on your credit record and remain there for six years. This can become a major problem. Your credit record is used by lenders when they consider a loan application. A CCJ can be a warning sign of a business in distress and will lower your credit score. So when you apply for any kind of finance, the lender will check for CCJs. Some finance providers will refuse to lend if you have a CCJ against yourself personally, or your company, as they believe it presents a risk that they might not be repaid.
How Rangewell helped
The brokers that the optician had turned to were unable to help him. At Rangewell, as an independent service, we take an innovative approach to answering our clients' needs - and this means we can often find ways to provide funding when others can’t.
There were three factors that would let us help the optician.
- First, we saw that he had property - his original business premises - which could be used to provide the security for a loan.
- Secondly, his original practice remained profitable - although it urgently needed reinvestment.
- And thirdly, we know lenders who specialise in providing solutions for people in CCJs.
We found a lender who could provide £300,000 as a secured loan at 7.9%
This allowed our client to pay off his debts, and recapitalise his core business - which is already returning to full profitability.
At Rangewell, we help opticians - and other business owners - with their funding needs. Some of the solutions we can help with include Franchise Loans for opticians, acquiring optician equipment, opticians competitor buyouts, refurbishing for opticians, plus many more. So if your practice needs help with finding funding, call our Optician Funding Team. Our service is free.