Location: Ontario
Facilities: Commercial Mortgage, Equipment Financing
Total Amount: $2,800,000
Loan-to-Value: 75%
Lender: Bank lender
Project: Purchase of an industrial building and new equipment
Primary goals achieved: Ownership of the facility, financing secured despite a short operating history
A family-owned precision machining shop in southwestern Ontario had outgrown its leased space. Demand from its customers was rising, and the shop couldn’t add capacity without more floor space and newer equipment.
The owners found an industrial building nearby that was right for them and wanted to buy it rather than sign another lease. Owning it would give them control over the space, steady occupancy costs, and room to expand. Buying new CNC equipment at the same time would let them take on larger contracts right away.
The challenge: Almost half of the company’s revenue came from one automotive-parts customer. Lenders see that kind of concentration as a major risk. If that customer cut back its orders, the business’s ability to repay could change quickly. The first lenders the owners approached either declined or offered terms that didn’t work for a purchase this size.
Our approach: Quantum Capital put together an underwriting package that dealt with the concentration risk directly. It showed the length of the relationship with the main customer and the multi-year supply agreement behind it. It also documented a confirmed order backlog, new contracts with customers in other industries, and projections showing how the added capacity would bring that customer’s share of revenue down over time. We also showed that the costs of owning would compare well with continuing to lease, and how the new equipment would improve margins. With that information, the lender could see the opportunity and not just the risk.
Deal structure:
$2.2M commercial mortgage: 5-year term amortized over 25 years. The payments keep cash flow manageable and build equity in the property.
$600K equipment financing: 7-year term matched to the useful life of the new CNC machines, keeping the company’s working capital free for operations.
The outcome: The company now owns its facility, has modern equipment, and has room to grow. The new capacity has already helped it win work outside the automotive sector, which reduces its reliance on one customer. It also has a stronger relationship with a lender that understands its business.