Specialist lender Somo has completed a £260,000 first charge facility to help a Hertfordshire day nursery refinance short-term debt and meet imminent payroll commitments, in a case involving third-party security and age criteria outside standard policy.
The established nursery required urgent capital to repay an existing short-term facility, clear a small amount of personal debt secured against a family home and inject working capital to support growth and upcoming wage bills.
With payroll deadlines approaching, time was a critical factor and the incumbent facilities were no longer fit for purpose.
The complexity centred on the security. The property offered as collateral was a residential home owned by the director’s mother rather than the borrowing company.
That structure required third-party security and charge documentation, consideration of owner-occupier protections and an age profile beyond many lenders’ standard criteria.
The loan also involved mixed-use funds, combining business purposes with the redemption of a personal lifetime mortgage.
For a number of lenders, that combination of third-party security, age exception and blended use of funds would have proved prohibitive.
However, the underlying case was supported by an established trading history, clean credit profile and detailed profit projections. The residential security was underpinned by strong comparable evidence.
Somo structured a 12-month first charge facility of £260,000 gross, equating to £218,270 net, secured at 67% loan-to-value against the property.
The funding consolidated short-term liabilities, redeemed the lifetime mortgage and released capital back into the nursery at a pivotal stage for the business.
Although there were initial queries from the valuer and additional requirements arising from the third-party security, the transaction progressed once comparable evidence and compliance around the third-party charge were confirmed and funder sign-off obtained.
Completion was achieved in time to stabilise the nursery’s position, remove unsuitable borrowing and protect the family’s residential asset.
With forward profitability projections supporting an eventual refinance and a clearer capital structure now in place, the business is expected to move onto a longer-term solution once trading stabilises.
