Enhancing security to reduce rates

The requirement

A groundworks and construction company was seeking £100,000. A poor winter led to many of the business jobs being postponed, tightening the cashflow. They needed the additional funds to hire more staff and utilise third party contractors to fulfil both backdated and current jobs.

The business had been trading for over 12 years and were profitable. However, the tight cashflow led to bounce payments and a lower business credit.

‍

The process

The business adverse financials would pose challenges for unsecured lending. Spark proceed with secured options, as the business directors were UK homeowners.

Spark presented an indicative offer that met the amount required. Given the financials and higher risk market sector, the offer was at the more expensive end of the market.

Although it was initially a secured loan by a property charge, Spark also utilised the business’ unencumbered assets to enhance the security backing the offer, reducing the rate and adding flexibility to the facility.

‍

Outcome

Due to now having a property, unencumbered plant equipment, and a personal guarantee, the lender was comfortable to renegotiate to a more satisfactory rate, where the directors were happy to proceed.

Spark successfully helped secure £102,000, allowing them to fulfil all jobs and recover cashflow.

‍

Secured finance

A secured loan is where the borrower offers an asset, usually a property, as collateral to secure the loan. The loan is secured by placing a charge on a property owned by either the  company or its director.

While not all lenders permit this approach, some may accept additional unencumbered assets as security. This enhances the lender's position in the event of a default, leading to lower interest rates due to the reduced risk.

‍