Consequences of payment holidays on HP agreements

[Jos Jones]

My company has been growing significantly over the last 3 years and we've taken on a huge amount of HP assets, all of which are fairly new and unable to extend/ renew without significant cost and effort.

I'm currently experiencing temporary cash flow issues and I'm only able to obtain very expensive, short-term, unsecured funding as we're essentially at the limit of our borrowing. We don't need to obtain more assets until Q4 this year but we would likely rent these assets rather than finance them.

The only alternative other than huge interest payments would be to take a payment holiday from our HP repayments. This would provide an large amount of cash but I'm unsure of the consequences and I don't want to spook our finance providers by asking the question as we do have another solution (albeit an expensive one)

How would payment holidays impact future borrowing from other lenders, future rates that we're able to borrow at and our existing credit rating? It would obviously impact our ability to borrow from those that we take holidays with but I'm also unsure for how long.

 

[Mark T Jones]

The broad answer is, it depends - on the individual the asset and the stage/past performance of the agreement

What I can say is that most lenders won't freely agree to it - they will need a solid business case, potentially additional security and fees.

TBH, 'expensive ' short term finance might be the best option - with the strong caveat that you have a clear way through, and aren't just trying to borrow your way out of trouble.