Inexperienced adviser costs client $90+k per annum
Our clients owned and operated a successful crash repair business. Over the years they had invested their profits into building a small but high-quality real estate portfolio. They owned their business premises, two quality residential properties in good suburbs and a farm.
The clients' accountant had done a good job in structuring their business and investments to both legally minimise their taxation liabilities and protect their assets. Because of the complexity of the structure and its apparent impact on capacity to service debt their previous broker had financed their considerable borrowings on a low doc basis with a non-conforming lender. These borrowings had been in place a number of years.
Company A acted as corporate trustee for two trusts:
- Trust 1 - operated the business,
- Trust 2 - owned their real estate assets.
Company B owned the operating assets / equipment of the business.
Their real estate assets, the businesses equipment and intellectual property were effectively safeguarded from any possible litigation against the business and vice versa.
When we met the clients, they were concerned about the interest costs associated with their current borrowings, they also wanted additional working capital for the business and to look at development options for their business premises. The owner of the adjoining land was obtaining approval for a unit development. If they were able to sell the business site or develop it, they wanted the flexibility and funds to be able to buy another business, or to pay out the debt.
Following a detailed review of the clients' financials we ascertained that subject to valuation we could achieve their objectives.
- Refinance their existing borrowings at a cheaper rate (monthly savings of $7,800 / $93,600 per annum) - Their previous broker had taken the easy / soft route and financed everything on low doc basis at a high rate.
- Provide the additional working capital they required.
- Secure the loan solely on the two residential properties leaving the business premises freehold (the lender did take a "make weight" mortgage on the farm - as there were no comparable sales for the larger residential property)
- No charge over the business
- Have the flexibility to buy another business without incurring further borrowings or costs if they sold / developed the business premises site.
The transaction was submitted to a major bank via a local business manager, approved and subsequently settled.
