An established multi-site retail business was carrying several higher-cost finance facilities, alongside overdue balances with key suppliers and the IRD. A recently opened location was also placing additional pressure on the group’s working capital.
The business wanted to simplify its existing debt, reduce the strain of regular repayments and create sufficient working capital headroom to progressively address overdue creditors.
The group’s established locations were performing well, but its newest location was still working towards profitability and was weighing on overall reported earnings.
At the same time, repayments across several existing finance facilities were absorbing a significant portion of weekly cash flow.
Refinancing those facilities into a longer-term structure was expected to reduce the immediate repayment burden and improve cash flow. The proposed funding would also provide capacity to begin clearing overdue trade creditors and IRD obligations in stages.
A secured term loan was considered appropriate because it allowed the business to consolidate its higher-cost facilities while supporting a structured plan to address overdue creditors.
Reported group serviceability remained tight due to the performance of the recently opened location. When assessing the underlying established operations, adjusted EBITDA was approximately $325,000, representing a margin of around 13%.
The facility was supported by property security, a GSA over the borrower and personal guarantees from the directors.
Although projected DSCR remained below Line Capital’s standard policy threshold, the combination of underlying operating performance, the expected cash-flow benefit from refinancing and the available security supported approval as a policy exception.
The business generated annual revenue of approximately $2.5 million, with its established operations continuing to generate positive earnings.
Underlying adjusted EBITDA, excluding the impact of the recently opened location, was approximately $325,000, representing an EBITDA margin of around 13%.
Following the proposed refinance, annual debt commitments were approximately $330,000. Projected DSCR remained just below 1.0x on the assessment methodology, against Line Capital’s standard 1.30x policy threshold.
The application was therefore approved as a policy exception, taking into account the underlying performance of the established operations, the expected improvement in cash flow following consolidation and the security supporting the facility.
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