Hermes Capital provides solutions to the working capital constraints that businesses face when they are trying to grow, re-structure, re-align or refinance.
The capital Hermes provides comes with the right structure, in the right quantity and at the right time to give our clients the decisive fire power they need to achieve their goals.
More than this however, Hermes is able to bring not only extensive financial experience, but also our professional networks to navigate a problem. In doing so, not only is the required funding more likely to be provided but the challenges a business faces can be addressed more substantially than otherwise achievable with capital alone.
This month’s case study demonstrates this principle in an example where an engineering business had a $1,050,000 tax problem.
An engineering business had accumulated a $1,050,000 tax debt as a result of rapid growth in the civil infrastructure sector. This became a problem when the client needed to show equipment lenders a clear portal for further equipment purchases that needed financing.
The client was on a payment plan of $35,000 per month having achieved a 30 month payment plan from the ATO. The new equipment was needed well before then, so something had to be done to shortcut the process.
The gap in the market for commercial finance
The client’s finance broker was aware of Hermes’ unique capacity for structuring facilities by taking into account plant and equipment and real estate equity as well as debtors.
The broker had also attended a recent Hermes seminar on “Raising Capital around Tax Arrears”, where dealing with ATO debts for SME’s was discussed in detail.
Hermes reviewed the client’s debtors as well as their other available assets, including a number of unencumbered heavy equipment items and some property with second mortgage equity.
Asset-Based Lending Solution
After evaluating the circumstances, Hermes determined that it could lend $700,000 against equipment and property on a term loan. This would be in addition to a $900,000 debtor finance facility. Hermes was able to introduce the client to an ATO negotiation specialist who made a case to the ATO in order to waive $250,000 in “General Interest Charge (GIC)”. This resulted in only $800,000 being left to deal with in total.
The initial term loan facility provided by Hermes in addition to the GIC waiver from the ATO meant that the client only had $100,000 left to pay. The client opted to clear the debt upfront out of the $900,000 debtor finance facility.
The broker was able to approach a wider section of the banking market to place the new equipment finance.
The business has effectively cleared its tax portal and is now working to continue its growth through winning new projects in the civil infrastructure space.