Director buy-out using Equipment Finance
After 18 years of jointly managing a small rural precision engineering business, when one of the directors wanted to move on, this business turned to their broker to help.
Precision machinery companies support a wide range of other local businesses, farmers and other customers through the making of bespoke parts using Computer Numerical Control (CNC) tools. A CNC machine processes a piece of material to meet specifications by following a coded programmed instruction and without a manual operator.The benefit is that bespoke items can be quickly produced at a reasonable cost.
With four machines this customer supports a large area of SW Queensland with orders based from their factory premises, which they acquired in 2014.
When the broker gathered this information and found that the machines and the premises itself were largely debt free, he looked to see if this was a way to raise the cash needed for the buy-out of the director.
The machines were of various ages, going back to the early 1990s but a valuation report showed there was still a residual value in the market. The broker worked with Classic Funding Group on a Sale-back solution using these as security.
Classic Funding Group Solution
The $70,000 Equipment Finance loan was set up and the director paid out. The secured loan runs for 3 years. This leaves the business able to carry on and look forward to 2020.
Director or partner buy-outs can hit a business hard both from their loss and the financial impact. To help smooth the way for you, there are likely to be many business finance options that can help.
Talk to your local broker or call us on 1300 780 895 to find out more.