£2.5M Equity Release for Successful Business Expansion

• Company value: Approximately £11 million
• Finance: £2.5 million unsecured business loan
• Purpose: Shareholder buyout, working capital and further business expansion
• Term: Five years, split between interest-only and capital repayment
• Rate: 6% at the time

Raising significant capital without offering traditional property or asset security can be challenging, particularly where finance is being sought against the future performance of an operating business. Enness was approached by an existing client looking to raise capital to buy out a minority shareholder while retaining sufficient funds to support the continued expansion of the business.

The client operated a successful education and specialist schooling business in South London. The business had previously been considered for sale at approximately £11 million, but the client had decided against selling and instead wanted to retain control while pursuing further growth opportunities.

The proposed funding was therefore intended to serve two purposes. A portion would be used to acquire the interest of a minority shareholder, while the remaining capital would provide additional liquidity for cash flow and capital expenditure as the business expanded.

The principal challenge was the structure of the borrowing. This was not an asset-backed loan where a property or other tangible asset could be offered as straightforward security. Instead, the proposed facility was based on the strength and future prospects of the underlying business. This significantly reduced the number of lenders likely to be comfortable with the application.

Enness identified a lender with a specific appetite for entrepreneurs and established businesses seeking funding for growth. The client’s previous relationship with Enness also meant that the team had a strong understanding of their wider circumstances and requirements.

Following discussions with the lender, Enness secured a £2.5 million unsecured facility. The funding allowed the client to acquire the 10% minority shareholding and retain full control of the business, with approximately £1.4 million remaining available for cash flow and capital expenditure.

The facility was arranged over five years, with the structure split between interest-only and capital repayment borrowing. The rate was 6% at the time.

The transaction provided the client with access to substantial capital without requiring traditional asset security. It also allowed the business to retain liquidity that could be deployed towards its next stage of growth rather than using all available resources to fund the shareholder buyout.

The case demonstrates how business finance can be structured around the strength and prospects of an established company, even where conventional asset-backed security is unavailable. Lender appetite can vary considerably depending on the sector, financial performance, purpose of borrowing and wider circumstances of the business.

For entrepreneurs seeking capital to support acquisitions, shareholder buyouts, working capital or expansion, specialist corporate finance can help identify lenders prepared to consider more bespoke funding structures.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, financial assessment and lender criteria. Terms, rates, fees and availability may vary depending on individual circumstances and the business being financed.

Risk Warning:
Business borrowing creates an obligation to make repayments regardless of future trading performance. Businesses can experience changes in revenue, profitability and cash flow, which may affect their ability to service borrowing. Borrowers should ensure that any proposed financing is appropriate for their circumstances and have a suitable strategy for meeting repayments.