Company: XYZ Business Services Pvt. Ltd
Line of Business: Providing Managed office spaces and Business Centres (eg. Regus)
Customer Turnover: 15-20 Cr
Customer’s Requirement: The customer wanted to purchase an office space in Mumbai with an agreement value of 30 Cr and wanted another 5 Cr for renovating the interiors. He did not wish to block his own funds upfront and wanted the entire amount financed by a bank.
Problem Area: According to RBI regulations, in a property purchase transaction, only 75% of the agreement value can be financed. The remaining funds have to be put in by the purchaser as his own contribution. Secondly, on a turnover of 15-20 Cr, no banker was willing to take an exposure of 36 Cr, as they did not have complete faith on the business model of Managed Offices. The customer had approached IndusInd Bank, Bank of Baroda, etc. and had been denied the funding. He had only 30 days to arrange for the funds for acquisition or the seller would look for other buyers for the property.
Solution: To solve the problem of no banker agreeing to fund the customer 36 Cr against his existing turnover, we split the deal amongst 2 bankers. We convinced the first banker to fund the client for acquisition and the other banker to fund him for interiors and subsequent working capital for running the business. The first banker financed 24 Cr against the agreement value of 30 Cr while the second banker was convinced to fund 12 Cr – 5 Cr for the interiors, and the remaining 7 Cr for Working Capital. The customer used the funds provided for working capital as a bridge loan for acquiring the property and would later use his own accruals to satisfy the working capital needs.
This entire deal was executed in 18 working days from the time the documentation was collected from the customer till the final disbursement. However, this is only possible if the customer if the customer is co-operative with documentation.
