Need help with financing machinery without directors guarantee

[Greg_Thomson]

Hi, I hope someone may be able to help.

I set up a company a couple of years ago with an old school friend which has really taken off. We have reinvested a lot of money back into the business which has allowed us to quickly become one of the main players in our niche market.

There is a cnc machine which we would like to purchase as it will really help improve production time as well as quality. The problem is it’s circa £100k and as we have invested in other areas we currently don’t have that available. We could do with getting it sooner rather than later as at the minute, not having the quality quite right is potentially going to lose us a big contract.

We have a business banking manager who has offered us £50k as a loan and have also spoken to Lombard regarding asset finance. I haven’t been through this process before so this is a bit new to me. Ideally what I would like is a finance company who is happy to lend and secure the loan on the machine. Lombard have said for any company under 3 years old, regardless of the situation they ask for a directors guarantee.

Does anyone know of any companies who may be able to help us out? Realistically we are looking to put down circa 40 - 50% (more if needed), but want the loan to be secured on the machine. The machine in question does not depreciate quickly and realistically would only lose 50% of its value in around a 15 year period so it should be a low risk for any lender.

Thanks in advance.
Greg

 

[Newchodge]

Why are you so worried about a PG if the company is so obviously going to make a profit. A PG is only a problem if the company goes tits up. Not wanting to accept a PG makes it sound like you have no faith in the company.

 

[Greg_Thomson]

Hi Newchodge

Thanks for your reply and a good question. I have full faith in the company, we are mega busy and turning a good profit. The reason for not wanting a directors guarantee is more of a personal one. I have a lovely partner, 2 children and nice roof over all of our heads. I promised her when I set up this venture that we would invest £x amount into it at the outset but under no circumstances would put our family or our house at any risk, regardless how small that risk was.

Thanks
Greg

 

[Mr D]

Some of the forum members may know of finance available or method to get the machine.
Can understand about not wanting to break a promise, finance is always a risk. Good companies with great futures still get caught out by later problems and regret PGs.

Is such a machine available on lease? Or could a smaller / cheaper machine do as an interim for a couple of years until in a much stronger position?

 

[Greg_Thomson]

Hi Mr D

Thanks for your input. Hopefully you are right and someone will know of a company who may look at doing this.

Personally I’ve always been one for saving before buying something as am not a fan of finance but at the same time don’t want to stunt the growth of the business because of this.

I will have a look into a lease maybe with an option to purchase in say 6 months time. Im not sure if anyone would consider doing this but certainly worth looking into.

Unfortunately this cost is pretty much the smallest entry level machine available from a reputable manufacturer.

Thanks again.
Greg

 

[Mark T Jones]

As an experienced finance broker I’m afraid to say that PGs are likely to be required by any finance company considering the deal

In real terms , the nature of the equipment and reasonable deposit mean that you are unlikely to be out of pocket if it goes wrong. The main reason for the PG is to keep you on side to help with disposal etc

‘The wife won’t let me’ is quite a common justification. Socially it is sound, but it doesn’t help the lender!

 

[Chris Ashdown]

You may be able to hire one on say a years terms with the option to buy at the end of the year,

Give the work to someone else who has the machine and is hungry for the work and take a lower profit until you can buy the machine you want

Look at second-hand machines from the makers which come fully refurbished you may even find a reposed one exactly the same as the one you want like this site
http://www.stevenmooneymachinery.co.uk/stock-category/cnc-lathes/

 

[The Byre]

There are so many used CNC milling machines on the market with low hours right now, that buying new would be bonkers!

https://www.ebay.co.uk/itm/Mikron-U...870240?hash=item2ee8c749a0:g:oL4AAOSwQaJXQsLv

https://www.ebay.co.uk/itm/Quaser-M...809720?hash=item2f0fef6378:g:zMwAAOSwjM5aIC8M

https://www.ebay.co.uk/itm/Yang-MV5...090679?hash=item2cb2f6f777:g:pFAAAOSw0OBYKYjE

and you can get smaller new machines as well -

https://www.ebay.co.uk/itm/NEW-Syil...515422?hash=item3f7f8755de:g:8pYAAOSwLa9UU5rR

Are you sure that this isn't a case of guys falling in love with shiny new toys? Restaurants, recording studios and film facilities, as well as metal shops tend to suffer from this syndrome in a big way!

 

[Gordon - Commercial Finance]

To echo @Mark T Jones for asset finance it is likely that you will need to give a PG, but that shouldn't be anything to worry about as the machine is the security. So long as you don't have any intention of ceasing payment and sending the machine to Bulgaria then the PG won't need to be invoked, and its not an additional investment on top of what you've agreed with your wife, it is simply giving your word that you'll not do a runner.

 

[Neil Lukins]

Hi,
As a Finance broker myself I can echo the comments above.
All lenders will look to secure their lending against something. If it is tangible the better but if not they will ask for PGs.
You mention above a bank manager has offered 50k - well this would no doubt be secured against a PG.
If you need 100k for the asset then asset finance is the way to go but again this would need a PG as secondary form of security should the asset not be able to repay the amount outstanding. All Asset Finance providers will also ask for a deposit which is usually between 10%-20%.

Unfortunately no lender will consider lending without having a PG in the background. As it's been stated above if the machine is in good order, insured and looked after it should provide sufficient security for the borrowings without the need for the PG to be invoked.
I could try and source you the finance with a PG from your business partner only so this does not affect you or your family but the other party needs to be in agreement with this.

If you still need asset finance then check my profile and send me an email with the asset details and I can send you some quotes - or Direct Message me if this is easier.

Neil
0161 8211478