Business Capital Restructure Gympie

Restructuring Capital for a Business Acquisition in Gympie

Case Study: Mortar Finance Brokers Capital Restructure for Major Business Acquisition in Gympie, QLD

When a well-established civil and earthmoving contractor in the Bowen Basin, Queensland, sought to acquire a complementary business in Gympie to expand its operational footprint, the challenge wasn’t the strategic fit, it was the financial structure. The business had strong assets and cash flow but lacked the necessary liquid capital to complete the $8 million acquisition. Traditional lenders viewed the proposal as high risk due to equity and servicing constraints.

This is where Mortar Finance stepped in. Through innovative structuring and asset-backed funding solutions, Mortar Finance enabled the client to unlock $4 million in equity from existing assets, reduce annual repayments, and successfully complete the acquisition, integrating the new business’s staff, equipment, and customers into the client’s growing operation.

Client Background and Objective

The client operated a profitable contracting business in the Bowen Basin, primarily servicing the mining and infrastructure sectors. With a fleet of machinery valued at $16.2 million and an existing finance balance of $7.3 million, the company was well-established and efficiently managed.

However, an opportunity arose to acquire a similar operation in Gympie, Queensland, a strategic move that would expand the company’s geographic reach, customer base, and equipment capacity. The acquisition involved $6 million in equipment and $2 million in goodwill, plus $1.2 million in associated taxes and transaction costs, bringing the total funding requirement to $9.2 million.

Despite the client’s strong asset base and sound financial history, they faced two key challenges:

1. Lack of a significant cash deposit to cover goodwill and costs.
2. Debt servicing coverage (DSCR) pressures under the proposed loan size.

Traditional lenders offered equipment finance (EF) and term loans secured by property, but these options provided limited flexibility and did not address the equity gap.

Challenges and Risks Identified

Mortar Finance identified several risks that needed to be carefully managed:

• Servicing Risk: The acquisition would increase the client’s total debt exposure, putting pressure on DSCR ratios.
• Equity Shortfall: The client did not have liquid funds available for the required deposit and working capital.
• Amortisation Pressure: Several existing EF contracts were structured with accelerated amortisation, reducing cash flow flexibility.

A traditional approach, combining business loans and property-secured facilities, would have limited the client’s capacity and potentially constrained future growth.

Mortar Finance’s Strategic Solution

Rather than following conventional lending paths, Mortar Finance undertook a comprehensive review of the client’s entire equipment fleet finance portfolio. The aim was to identify opportunities to unlock equity and optimise repayment terms to improve serviceability.

The proposed solution had three major components:

1. Refinance Existing Equipment Fleet:
   • Reassess all current EF contracts and refinance the fleet to a 70% Loan-to-Value Ratio (LVR).
   • This released $4 million in equity, which could be used to fund the deposit, goodwill, and working capital
2. Improve Cash Flow via Term Adjustment:
   • By extending some loan terms to align with the effective life of the assets, Mortar Finance was able to reduce annual repayments by $13,000, improving DSCR and liquidity.
3. Structure the Acquisition Fleet Finance:
   • Finance the newly acquired equipment at a 66% LVR, ensuring that each asset’s loan term and interest rate matched its marketability and lifespan.

This structure gave the client immediate access to the funds required for acquisition without the need for additional property security or new capital injections.

Tailored Facility Structuring

Mortar Finance arranged six separate equipment finance facilities, each individually structured to account for:

• Effective Life of Assets: Ensuring repayment terms matched realistic depreciation schedules.
• Asset Class and Marketability: Differentiating between primary, secondary, and tertiary assets to achieve competitive rates and terms.
• Equity and Cash Flow Impact: Balancing loan amounts and terms to optimise liquidity while maintaining manageable monthly commitments.

The restructuring approach demonstrated Mortar Finance’s deep understanding of asset finance and how to leverage equipment equity for strategic growth.

Results and Outcomes

The final structure produced a transformative financial outcome for the client:

• $9 million total increase in lending capacity — a 56% uplift on the existing portfolio.
  
• Only a $96,000 increase in monthly commitments, representing a 33% increase, despite the major acquisition.
• $4 million in equity released, enabling the client to fund goodwill, deposits, and transaction costs without diluting ownership or seeking external investors.
• Improved cash flow through refinanced terms, supporting a stronger DSCR and reducing repayment strain.
• A smooth acquisition of the Gympie business, which integrated seamlessly into the existing operation.
  

The newly combined business is now forecast to generate an additional $2.5 million per annum in EBITDA, positioning the client for continued expansion and future asset replacement with strong cash reserves.

Conclusion

This case study highlights Mortar Finance’s ability to deliver innovative funding solutions for complex commercial transactions. By re-engineering the client’s capital structure, Mortar Finance turned a high-risk proposal into a sustainable, asset-backed growth strategy.

Through careful analysis, refinancing, and loan structuring, Mortar Finance not only secured the acquisition funding but also improved the client’s liquidity, equity position, and long-term serviceability, ensuring the success of the Gympie business acquisition and setting a solid foundation for future expansion.

Mortar Finance,  Empowering business growth through smart structuring and strategic funding.