Given this was during the first Covid lockdowns in NSW, lenders were very cautious at the time.
The bakery cafe’s main business activity of serving dine-in customers was no longer possible so the historical financial performance was not sufficient to justify servicing.
The owners did have cash reserves but they preferred to hold onto as much of it as possible due to the extreme uncertainty brought about by the pandemic. Therefore, no deposit was available.
A commercial oven was needed urgently in order to meet the new supply agreements otherwise the business revenue would cease.
We presented a Covid management plan and how the bakery cafe would pivot its business from serving dine in customers to supplying through to retail grocery chains; however at the core they would be essentially still be conducting the same operations of producing and selling bagels, just on a bigger scale.
The outcome was a facility to finance the full purchase price with no deposit or income documentation required. This was possible because the Directors were property owners and the business had been operating for 5 years. It also helped that the brand new commercial oven had a very long useful life of 15 years. Compared to a loan term of 5 years, the lender’s resale risk in a default situation was mitigated.