Asset Refinancing Provides £40,000 Capital Injection For New Delivery Business
New businesses can often struggle to secure finance from lenders due to their inexperience and lack of security. However, there may be alternative routes to raising the cash you need – especially if your new business owns valuable assets such as vehicles and machinery outright.
Table of Contents
After a father and son decided to combine their logistics and delivery experience to launch their own delivery service, they faced a challenge when trying to fund further growth. Despite having identified major profit margins if they could purchase a third vehicle and hire an additional member of staff, the business didn’t have the capital to hand and couldn’t generate interest from lenders.
Much of the challenge was due to only operating for six months, which meant lenders were hesitant to offer any beneficial finance despite the duo having over 20 years of combined experience in the industry and a strong business plan that justified the benefits of the investment.
However, they also owned two delivery vans with no finance left on them, meaning they were unencumbered assets that could be leveraged to raise further cash. Lenders don’t typically offer asset refinancing deals direct to clients, so the father-and-son business approached Rangewell to act on their behalf.
Why was there a problem?
Our client’s problem was clear: they needed cash to fund growth but lenders were refusing them due to their business’s short trading history. The father and son possessed extensive experience in the delivery industry, but this was overlooked by lenders when they applied themselves.
The client had a contract agreed with a national delivery company that was lucrative but to fulfil expectations, they would need to fund the purchase of a third vehicle and hire a new employee or the contract would be awarded to another provider.
This meant the client needed to find finance quickly, but all enquiries they made directly to lenders were met with refusals. Looking for an alternative solution, they approached the team here at Rangewell. After talking through the client’s situation, we were able to discuss the value of asset refinancing.
Why we were able to help
Discussing finance with a business often leads to Rangewell finding solutions that the client never considered. We are experts in the industry, which means we can identify routes to support you that you might not be aware of. In this case, we found out that the business owned two vans with no outstanding payments left – giving them access to unencumbered assets we could use as collateral for lenders.
We explained the asset refinancing option to the client, which would see funds lent against the value of their vans. The client agreed with our recommendations and we began to negotiate with a lender that was receptive to the idea.
With Rangewell’s long-standing relationships with lenders providing the ‘foot in the door’, the client was able to represent their experience to lenders and present a business plan that showed the value added by a potential cash injection. The lender then offered a £40,000 asset refinancing loan which was 37% cheaper than the price of a contract hire for a new van.
Accessing this loan meant the client could not only purchase a new van more freely without being limited to offers on contract hire loans from automotive dealers, but they could also pay wages for a new hire. These factors combined to allow the client to fulfill the DPD contract and vastly increase their profitability.
Get to the right lenders with Rangewell.
Lots of businesses struggle when they seek finance agreements - largely due to inexperience and lack of insight into how the industry works. Lenders often hesitate to negotiate deals directly with clients, reserving much of their best agreements for broker-led arrangements.
As a business looking to borrow, you may be unaware of this and have struggled to secure business loans or similar finance in the past. Not only does having Rangewell acting on your side help you represent yourself to lenders, but we can also identify routes to finance you may not have considered.
In this case, asset refinancing was the perfect option as it allowed the father-son business to expand without having to risk personal assets as security and was cheaper than a new contract purchase from mainstream automotive dealerships.