10.9.2019

7 min

Should You Add Another Lender to Your Finance Arrangements?

At Balanz, we regularly have conversations with clients who are concerned they have reached the peak of their funding capacity with a particular lender.  If this is the case, it is important to start planning early as timing is everything. Why? Because the best time to obtain additional capacity in your financial arrangements is when you don’t have a pressing need for it!

One of the key risks we educate our clients on is financier risk – i.e. the risk your financier won’t be able to support you as you grow your business.  This may be due to the financier’s risk tolerance for a particular industry or their policies around security, or simply that the client hasn’t been able to adequately communicate their business and financial information in a compelling manner.

A poorly structured funding arrangement can leave clients with an inappropriate repayment program, a lack of liquidity and a focus on security rather than cashflow. Often we can overcome a financier’s reluctance to provide additional facilities by restructuring existing lending arrangements. This may involve moving some of their funding from term debt to working capital, using trade finance to assist with inventory requirements, or introducing third party financiers to fund new plant and equipment under appropriately structured asset finance.

However, for some of our larger clients this may also require introducing another lender(s) to their funding arrangement under a club or syndicated financing arrangement.  The advantage of this is that you end up with two or more lenders with capacity and appetite to provide finance, as well as competition for your other banking business, such as transactional banking, merchant facilities or foreign exchange.  These arrangements can also be structured so that fees and margins are competitively bid – meaning that you can realistically end up with a better all up funding cost.  Of course there is the cost of getting this type of arrangement in place, such as legal fees, but this is often offset by the flexibility and additional capacity such structures provide now and into the future.

So indeed, in some instances an introduction of an additional lender(s) is a good strategy; however, sometimes a restructure with your existing financier will go a long way to ease your concerns. Which path should you take?With a preliminary review of your current financing arrangements, Balanz can provide valuable insights into your best way forward…

Are you worried your financier can’t support your business
and its growth aspirations? Balanz can help.

Contact Kerry Gillan on kerry.gillan@balanz.com.au or 0437 607 815

Balanz – Your Partner in Business Finance

www.balanz.com.au

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