Growth Guarantee Scheme Term Loan and Growth Finance Facility for Third Party Logistics Company

In an increasingly competitive marketplace such as logistics, growth and expansion are crucial. Improving customer reach and brand awareness whilst also meeting a rising customer demand gives businesses the best chance at excelling.

The long-term financial debt accrued by expanding your business operations, however, can be a difficult drain on your business’s funding, which is why utilising lending to retain cash flow and further expand in the meantime can be essential.

Refinancing an existing debt facility can be a fantastic way of reducing monthly payments, and with our team’s bespoke approach, we’re highly capable of providing a streamlined solution that’ll cut down the costs of your legacy finance arrangements dramatically.

The Scenario

A third-party logistics company approached us after having refurbished a new property back in 2022, accruing a debt of £3.3 million at the time.

Our client was making payments of £77,000 per month and had reduced the debt to a total of £1.8 million but found the impact on cash flow to be significant and harmful to business operations.

They had initially attempted to acquire a business loan without the aid of a broker and were offered a £2 million loan from their existing commercial bank, which had high interest rates and lacked any significant flexibility.

Our client’s business wasn’t large enough for an individual relationship manager at their commercial bank to provide a bespoke solution, but their requirements were too complex to arrange themselves alongside the day-to-day running of the business – so, they reached out to Clifton Private Finance for support.

We are well-placed to assist clients in acquiring the best financial solutions from lenders and can act as an intermediary to entirely streamline the process for both sides, giving you quicker and cheaper access to capital.

The Process

In exploring options for our client, we initially approached the situation with the proposed financing structure:

• A Growth Guarantee Scheme (GGS) term loan of £1.8 million to be paid over six years
• £700K Confidential Invoice Discounting facility

Growth Guarantee Scheme (GGS)

The Growth Guarantee Scheme is a government-backed incentive to lenders to encourage them to lend money to businesses where they perhaps may not have done so before due to a business not meeting their credit appetite.

The government provides a guarantee to the lender, that should a business be unable to meet their debt obligations, and fall into default, then the lender can look to reclaim 70% of their loss from the government under the scheme.

Confidential Invoice Discounting

Alongside the proposed GGS-backed loan, a £700K Confidential Invoice Discounting facility involves a client securing lending against its trade debtor book.

A trade debtor book contains a record of invoices that have been raised to third-party companies, but have not yet been paid, effectively money that is owed to the business.

The lender will release up to 90% of the funds to the business on the first day of raising the invoice, and then the debtor will repay the bank once the invoice is due, with the bank releasing the 10% difference back to the business at the point the invoice has been repaid.

This process can repeat itself and the business will pay a monthly minimum service fee plus a percentage of interest based on the funds being utilised.

The Problem

The major problem with this refinancing structure was finding a lender to handle both forms of financing. Our broker reached out to multiple banks but found that lenders were only interested in approving one aspect of the loan structure, such as a GGS loan, but weren’t then comfortable providing CID, and vice-versa.

Though our broker pushed for a single lender for simplicity, lenders weren’t comfortable covering both types of finance for the client. A creative adjustment to the offer was required.

The Solution

Going back to the drawing board, our broker instead proposed an alternative offer: a £1 million term loan supported by the GGS, and a £1.5 million Growth Finance Facility.

Growth Finance Facility

A Growth Finance Facility differs from a typical term loan, as there is no fixed monthly capital repayment requirement. There is a requirement to service the monthly interest cost of any funds being utilised and the repayment of any capital is at the discretion of the business, very much in line with an overdraft facility.

It created exceptional flexibility for our client and meant they could use one single lender which would streamline the ongoing management of their finance arrangements.

Our client’s impressive creditworthiness was only strengthened by their prior regular payments of £77,000 per month, and our broker stressed this during their application to negotiate a better deal.

The Result

The lender approved the £1 million term loan and £1.5 million Growth Finance Facility (revolving line of credit) backed by the Growth Guarantee Scheme, allowing our client to reduce their monthly repayments from £77K per month to £19K per month, unlocking significant cash flow for the business.

Our client is now looking to further expand across the UK using their Growth Finance Facility, which can be indefinitely drawn upon and repaid.

Regardless of the size and complexity of your financial needs, Clifton Private Finance is here to support the growth and expansion of your business.