The client was a young, motivated self-employed removalist who owned a 5-tonne truck and a 10-tonne truck.
The business was in upstart stage, having been trading for 20 months.
Six months ago, he financed the purchase of his second truck in order to meet growing enquiry volumes.
He saw an opportunity for further revenue growth by purchasing a third truck to complete his fleet.
The truck he wanted to buy was a medium-sized truck – an Isuzu NPR worth $11,000, and was a private sale.
At the time the client contacted us about purchasing the third truck, there was also another buyer keen to own it. So he had to move quickly.
The business only had one full year of financials and this was a start up year which was not representative of actual trading conditions.
While the client had sufficient cash to purchase the truck outright, he wanted to preserve this cash towards other revenue generating activities such as marketing and lead generation.
Further he recently added a third staff member so his ‘war chest’ of working capital had to be topped up.
The transaction turned upon securing finance where the cost of funds would be outweighed by the potential return he could generate by saving this cash for working capital needs.
In the credit paper for this transaction, we presented the client’s trading history from inception until the present day by showing interim financials.
This showed since the business went from one truck to two, revenue and net profit had doubled.
The repayment history for the loan taken out 6 months ago for the second truck was clean and the lender was willing to give a reference.
Evidence of the client’s strong balance sheet position gave Macquarie (a tier 1 lender) comfort to offer interest rates that would usually apply only for businesses 2 years or older.
The cost of funds was acceptable and made it feasible for the client to finance his third truck purchase, and invest his cash into other initiatives.
The client completed his fleet with a third truck, a timely and value-adding asset for his growing upstart.