£750k Management Buy Out Finance For Funeral Director

The Scenario

We were recently approached by the owners of a funeral director who were looking to buy out one of the existing Directors.

The Director in question was looking to retire: one of the most common scenarios we see for Management Buyout Finance.

The challenge that many companies have when buying out the ownership of a business, is raising enough cash to do so.

While they may have healthy profits and business forecasts, it’s rare that a business has large volumes of cash on hand to buy out an owner.

The Solution

In this case, the most significant asset the funeral directors owned was the commercial property itself, which was currently unencumbered (no existing mortgage on the property).

We spoke to a number of lenders – from high street banks to specialist business finance lenders – to ascertain the best route for a commercial mortgage raised against the property (also referred to as a commercial term loan).

Valued at £1m, the £750k loan required would mean a 75% loan to value facility, which was low enough to keep interest rates competitive.

In this case, we ultimately placed the loan with a main stream bank, resulting in an interest rate just 3% above the BoE base rate – extremely competitive for a large commercial mortgage on a high value property where the funds are being used for a management buyout (a fairly unorthodox use of funds).

At Clifton Private Finance, we always explore the most cost-effective solution for your finance needs, which often isn’t the most obvious or ‘traditional’ method of raising funds.