A mid-sized developer of commercial properties found a way to finance
several projects without placing undue strain on cash flow.
|RM 3.5 million||3 years||60%|
|Gathered with assistance from FundIn||Investment tenure||Return over investment period|
Gathering Capital To Fund Ongoing Projects
A mid-sized developer of commercial properties in Malacca town needed more than 3 million ringgit in financing to fund several of its projects. Pursuing a loan from the bank was an option but can be a restrictive process. Finance from a bank can only be deployed to specific projects and will only partially fund a development. Monthly interest payments would also strain cashflow at a time when projects were still in development and sales had yet to kick off.
A win-win deal
A team of expert financial consultants worked with Fundin’s network of investors to pool about 3.5 million ringgit for this developer. In exchange, the investors were rewarded with 20% interest per annum. As a collateral for this investment, the company offered ordinary shares of their mother company, valued at a net worth of approximately RM10 million. By pursuing a private equity deal with investors, it could secure financing to be deployed as it wished and skip monthly interest payments, in exchange for a lump sum after three years. This would free up cash for its ongoing projects.
With financing in place, this property company was able to deploy capital for its projects more efficiently. The firm decided to repay the outstanding loan in three years instead of the maximum five years.
“As investors had secured a significant number of shares of the holding company as collateral, they were able to confidently back the developer – knowing that if something went south, they would have a real, tangible asset they could monetize. Investors always need to be assured their investment would be safe over an extended period of time. In this case, the firm’s strong goodwill within the property development industry and significant business experience boosted confidence.”
Jackson Ong, FundIn