A small metropolitan based engineering business which was established in 1975 by the Director and currently employs 14 staff.
The Business Structure comprises one company, three trusts and a superannuation fund. The family involvement comprises the two Directors (Mum and Dad) and an adult son as GM.
The customer has been a client of the Broking Firm since 1995 with fifty seven current and completed EF facilities through eleven lenders. Prior to this the business was a client of the Directors of the Broking Firm (when they were employed elsewhere) for many years.
The customer wished to acquire a new additional CNC Lathe at a cost $480,000 to expand his business. The machine was to be supplied via a local long established manufacturer’s agent. The manufacturer of the equipment was based in South Korea.
The client required assistance with the importing of the equipment and long term EF funding once it arrived.
The customer called for quotes from their bank (a big 4 Bank) and from us as their Broker. Their Bank suggested they could offer the facility required.
It should be noted some of the loan structures suggested by the bank we felt were not in the benefit of the customer and as such did not quote for those structures.
The initial outcome being that the Bank was asked to look at the facility. After several weeks of going backwards and forwards the bank could not provide the facility in a reasonable fashion. This was based around two issues – firstly they could not provide assistance with the importing of the equipment and secondly they were having trouble in understanding the cash flows within the business and this transaction because of the interoperation of the trusts and superfund.
The end result was as the Broker we were asked to step in and arrange the facilities required. We arranged all the necessary facilities – including (on a standalone basis) an unsecured DLC in favour of the Manufacturers Agent. We then arranged for the Manufacturers Agent in turn to use the DLC on a back to back basis to provide a DLC for the manufacturer in South Korea. This allowed the importing of the equipment.
At the same time we arranged the long term EF funding (through a major Bank) for the equipment upon its arrival in Australia. In particular this required an explanation for the funder of the interaction between the various entities within the customer’s business group.
The equipment arrived in Australia February 2018. The DLC was completed and the long term EF funding settled. The early reports from the customer indicate that the machine settled in well and is generating revenues in excess of their expectations.
WHY AS A BROKER WERE WE ABLE TO DO WHAT A BIG $ BANK COULD NOT?
1. Our long term relationship with the customer meant we had a sound understanding of their business and their corporate structure.
2. Our long term stable staff are highly experienced, qualified and trained in the provision of EF funding. The complications involved in the transactions were able to be addressed by our expertise.
3. As a Broker we had access to arrange of products (not limited to the offerings of one institution). Even though the client’s bank struggled with the transaction – with the broker’s assistance the complete transaction and process was arranged through a big 4 bank’s facilities.
4. As Brokers we were well aware of the supplier in this transaction and were able to offer a solution to their requirements as far as the importing of the equipment was concerned.
FOR THE CUSTOMER’S BENEFIT!
1. The client achieved the purchase of the equipment they needed to grow their business with funding arranged that met their requirements (both short and long term).
2. The funding provided was achieved on a commercial basis (gross interest rate for the long term funding (fixed for five years) was approximately 5.5% with minimal loan cost and establishment fees).
3. The client saved substantial time and saved a lot of aggravation as we as their brokers were able to address many of the questions without bothering the customer.
4. The purchase and funding of the equipment was achieved without the need for rearranging securities to meet the requirements of the lender. Rearranging securities would have involved significant time, delays and costs. All the facilities (the DLC and EF funding) provided by the broker were standalone.
5. As Brokers we have continued to be involved (as we have for 20+ years) with the customer and provide additional support if and when requested.
6. The customer’s arrangements with the manufacturer’s agent have been maintained and supported ensuring good ongoing support/training by the manufacturer of the equipment.
Simon Hiller is Managing Director at Capital Contacts Pty Ltd and is a member of the CAFBA board.