Investment Rescue

How We Turned a $2M Liability into a Cashflow Win

The Challenge 

A group of directors had taken out a $2 million loan to fund the purchase of a boarding house investment. The loan had been arranged by another broker through a non-bank lender on unfavorable terms: 

• Interest rates of 9.22% 

• A mix of principal & interest and interest-only repayments 

• All directors’ businesses tied up under a General Security Agreement (GSA) 

• Personal guarantees from each director 

• A loan structure that wasn’t fully secured by property 

The loan was putting serious strain on the group’s finances. Each month, the repayments were much higher than the income the boarding house was bringing in. They were falling short financially, and it was starting to take a toll. The directors were under pressure to either sell assets, dip into personal funds, or try to borrow more money just to stay afloat. The situation wasn’t sustainable, and they needed a better solution.  

The Turning Point 

Daniel stepped in and conducted a full review of the group’s structure, finances, and available assets. He uncovered a crucial piece of the puzzle: one of the directors personally owned a block of land with only a small loan against it, plus a principal place of residence with significant equity. These personal assets weren’t tied up in the group’s original lending. 

This discovery allowed Daniel to completely rethink the structure and turn an unworkable deal into a financeable one. 

The Restructure 

Daniel orchestrated a complete overhaul of the lending strategy: 

• Valuation uplift: Commissioned a fresh valuation of the boarding house, which came in slightly above the original purchase price. 

• New security mix: Added the director’s under-utilised land and equity in the family home as security to bring the LVR down to acceptable levels. 

• Loan restructure: Moved the loan from a non-bank lender to a mainstream bank, securing a new interest-only facility at 6.14%, compared to the prior 9.22%. 

• Reduced guarantees and GSAs: Simplified the structure by removing most of the group’s businesses from the GSA. Only one trading business, which generated enough income to support the deal, was retained as part of the security profile. This significantly reduced the exposure of the group’s other entities and allowed the directors to retain flexibility for future moves. 

• Cash out: Arranged a slight top-up to fund improvements to the property and free up funds for the directors to execute other personal financial goals. 

The Additional Complexity 

While the boarding house refinance alone was complex, the deal also needed to support other urgent and high-stakes requirements for one of the directors, including: 

• Refinancing the director’s PPR 

• Releasing equity to fund a construction project on the vacant block of land 

• Facilitating the purchase of an off-the-plan apartment with a hard settlement deadline 

• Discharging an active bank guarantee 

• Coordinating three separate lenders to settle simultaneously 

• Working around the fact that the main director was travelling internationally, which made signing documents a major logistical challenge 

To prevent the client from losing a $110K deposit and missing out on more than $1M in capital gains tied to the off-the-plan property, Daniel even prepared a bridging loan fallback in case the primary settlement couldn’t proceed on time. 

The Outcome 

The transformation was dramatic: 

• The original monthly cashflow deficit was eliminated, turning the boarding house into a positive cashflow investment 

• The interest rate dropped from 9.22% to 6.14%, reducing interest costs by tens of thousands annually 

• The group’s exposure was reduced, with unnecessary guarantees and GSAs stripped out 

• A critical property purchase was completed on time, avoiding the loss of deposit and capital gains 

• The directors gained flexibility and breathing room, with personal and business assets better structured for future planning 

In Their Words 

 "Daniel from Finhem went above and beyond to assist me with both a refinance and a new application for a residential build. I would not have got my deal across the line without Daniel's experience and contacts to assist with this matter. I highly recommend Finhem." 
— Patrick Donohue

Loan Structure Comparison (with repayment focus):

If you would like to discuss your unique circumstance, book a call with our principal, Daniel Ward.

**This is general advice and does not take into account your personal circumstances.