- Product: Unsecured term loan over five years
- Debt-to-equity: Circa 65%
- Interest Rate: 10% fixed
- Special Conditions: Ability to overpay at no additional cost
Enness was approached by an ambitious business owner looking to scale their existing group of companies with a view to preparing the business for a potential exit over the next 10 to 15 years. The strategy was to accelerate growth by acquiring underperforming businesses that could benefit from the client’s existing expertise, infrastructure and operational efficiencies.
By integrating these businesses into the wider group, the client believed they could improve efficiency and increase profit margins. However, they required a financing structure that would provide sufficient capital to support acquisitions while maintaining an appropriate level of debt relative to the group’s assets.
The client was particularly focused on managing the cost and flexibility of the borrowing. They wanted a structure that would provide sufficient security for the lender while allowing the business to retain control over its cash flow as the acquired businesses were integrated.
Enness reviewed the client’s requirements and successfully negotiated a bespoke corporate finance facility with a debt-to-equity ratio of approximately 65%. An element of deferred consideration was incorporated into the structure to ensure that the overall transaction remained appropriate for all parties.
The facility was structured as an unsecured five-year term loan with a fixed interest rate of 10%. Importantly, Enness negotiated the ability for the client to make overpayments without incurring an additional charge.
This flexibility was particularly valuable given the client’s growth strategy. As the newly acquired businesses became integrated into the existing group and efficiencies were realised, the client could use additional cash flow to reduce the outstanding debt. Overpaying could therefore shorten the effective borrowing period while reducing the amount of interest paid over the life of the facility, subject to the agreed terms.
The resulting structure gave the client a balance between certainty and flexibility: the fixed interest rate provided visibility over the cost of borrowing, while the ability to make additional repayments allowed the business to respond to improved performance without being locked into a rigid repayment profile.
The case demonstrates the importance of considering the structure of business finance alongside the headline interest rate. For acquisition-led growth strategies, repayment flexibility, deferred consideration and the relationship between debt and available equity can all play an important role in determining whether a facility is appropriate.
Enness has access to a broad network of lenders across the corporate finance market, allowing us to compare different structures and identify solutions suited to individual businesses. If you or your clients are considering acquisition finance, growth funding or succession planning, speak to a mortgage specialist to discuss your requirements.
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