Refinancing and improvement of borrowing terms
Situation
The company, involved in the trading of office equipment, felt fortunate to have successfully obtained a term loan from a local bank. However, the bank was charging a relatively high interest rate, demanded high collateral and required guarantee from CGC (Credit Guarantee Corporation). The borrowing terms were not beneficial to the company.
Actions / Challenges
Leap Forth was appointed to review and negotiate the borrowing terms with the bank. Market sounding with other local banks confirmed that the borrowing terms were not in line with the existing lending benchmark. Based on Leap Forth's advice, the company wrote to the bank proposing revised terms and clearly indicated that it will refinance the term loan if the bank refused to accept the proposed terms. After several discussions and meetings with the bank's senior management, the bank refused to accept the revised terms.
Leap Forth prepared a new Loan Proposal, detailing the company's vision, projected profitability and market potential. The Loan Proposal was submitted to several local banks. The company finally decided to accept the offer of one of the new banks and refinanced the term loan.
Results
The new term loan saved the company about 0.5% interest rate per year, reduced the fixed deposit amount used as collateral and removed the CGC guarantee. This improved the liquidity of the company and lowered the effective funding rate.
Situation
The company, involved in the trading of office equipment, felt fortunate to have successfully obtained a term loan from a local bank. However, the bank was charging a relatively high interest rate, demanded high collateral and required guarantee from CGC (Credit Guarantee Corporation). The borrowing terms were not beneficial to the company.
Actions / Challenges
Leap Forth was appointed to review and negotiate the borrowing terms with the bank. Market sounding with other local banks confirmed that the borrowing terms were not in line with the existing lending benchmark. Based on Leap Forth's advice, the company wrote to the bank proposing revised terms and clearly indicated that it will refinance the term loan if the bank refused to accept the proposed terms. After several discussions and meetings with the bank's senior management, the bank refused to accept the revised terms.
Leap Forth prepared a new Loan Proposal, detailing the company's vision, projected profitability and market potential. The Loan Proposal was submitted to several local banks. The company finally decided to accept the offer of one of the new banks and refinanced the term loan.
Results
The new term loan saved the company about 0.5% interest rate per year, reduced the fixed deposit amount used as collateral and removed the CGC guarantee. This improved the liquidity of the company and lowered the effective funding rate.
