12 Jun King for a Day – Article and Case study
KING FOR A DAY….
Do you want to be king of your cash flow?
Now is the time to take charge and ensure your financial situation is in the best possible shape. Read the article and supporting RSP client case study to see why Brad and Ian may be able to help you become King of your cash flow…..
We’d love to hear any comments you may have about this article, so please feel free to comment.
King for a Day
An equipment finance case study
As a business owner, the King of Cash Flow, you would strategically review and ceremoniously execute acute financial restructures to permit free cash flow to roll to the bottom line as additional profit. After all you are in control and the King of Cash Flow.
We are currently operating in a low interest rate environment. A yield curve that has been delicately falling as central banks pump cash and buying Australia’s AAA government bonds. Equipment Finance is a fixed interest commitment, generally ranging between 3 – 7 years. Any portfolio of equipment with EF commitments that was set on average > 12 months would, by default of falling interest rates, be paying a premium in today’s market.
A restructure of this portfolio could possibly capture both a lower rate of interest and a reduced commitment schedule which would free up cash flow within the business. This is a liquidity event that could be reinvested back into the business for expansion, pay down core debt or re-invest into diversified assets
1. Client Position
A client owned and managed a successful transport logistics company and it was made apparent that their existing bank did not have the resources to attend to his most basic financial needs. Robinson Sewell Partners (RSP) was engaged to restructure and improve this position and provide a more efficient financial trading platform for his business.
After completing financial due diligence determining that the client had a satisfactory credit profile, the client had the capacity to explore this avenue under the guidance of RSP. Throughout the process, RSP recognised, through re-engineering of his current portfolio equipment finance, that material cash flow benefits could be attained. This strategy was presented and accepted by the client. A $2.0 million restructuring freed up in excess of $100,000 of cash flow p.a. which was then applied to aggressively reducing non tax deductible debt.
As Elvis, the King of Rock ‘n Roll, you would synchronically thrust and gyrate in front of an ocean of pulsating fans until the sun wearingly rose over the Vegas Strip. This is the King’s pilgrimage and rite of passage.
As a lion, the King of the Jungle, you would admiringly stargaze upon your loyal pride dragging in a tender gazelle whilst roaring at the hindquarters of a lingering snickering hyena. As king, this is your duty.
Be the King of your Cash Flow
Please note: the following considerations must be taken into account;
1. Maturity profile of Plant & Equipment vs use of life / depreciation of the assets.
2. Breakage clauses and costs in the existing equipment finance contracts.
3. Business and capex re-investment strategy
4. Bank policy parameters
5. Current client credit profile and feasibility of the business case.
Ian Robinson & Brad Sewell