October 30th, 2012 / Insight posted in

To sell or not to sell – that is the question

With predictions for the commercial property market to remain fairly subdued throughout 2011 and for interest rates to rise gradually, is now the right time to purchase a new site, re-finance your existing dealership, or simply sell up?

The gradual easing by lenders seen over the last year has continued, albeit in a cautious manner. Deals continue to be offered by lenders across the market, large and small, complex and straightforward.

Margins sadly remain high. With Bank Base rate (BBR) under pressure to increase, to curb the risk of higher inflation, hedging some or all of one’s debt could be prudent and should be explored.

Whilst securing competitive funding to assist with the purchase, refinance or redevelopment of showroom and workshop premises can be a challenge, it is not impossible.

Most lenders continue to operate with a limited and cautious appetite within the sector. Knowing the correct contacts in the right Banks is therefore key. A good business plan and a well thought-through funding strategy is imperative to being successful in achieving competitive terms.

Recent automotive case study

A motorcycle dealership came to us wanting to buy larger premises for their own occupation. They had banked with the same source for the last 12 years. Their Bank did not wish to fund more than 50% of the purchase price of the new building.

We secured 75% funding against the cost of the new showroom, with the first year on an interest-only basis. This gave sufficient ease of cashflow to enable the new showroom to be established. The facility was structured with a 20 year capital and interest repayment profile and was priced at 2.55% over the cost of funds.

Kingston Smith Financial Advisers, part of the Kingston Smith group, offer a truly independent approach via their award winning team. They are well placed to provide a hand held service to clients and, making use of their extensive contacts, will negotiate the best possible terms on behalf of the client at all times.

To discuss this in further detail, or any other business related issue, please contact our Lead Partner, Janice Riches.