Capital Raising Remortgage to Fund a Business Investment
£425,000 · 20 years · 4.59% fixed 5 yrs. A business owner wanted to raise £120,000 from his home to invest in a franchise opportunity.
The Client
Business owner
The Challenge
A business owner wanted to raise £120,000 from his home to invest in a franchise opportunity. His existing mortgage was at a competitive rate with eighteen months remaining on the fixed term, meaning an ERC of approximately £4,200 would be payable. The business investment decision needed to be weighed against the ERC cost.
Our Solution
Doulton modelled three scenarios: waiting eighteen months for the ERC to expire, paying the ERC and remortgaging immediately, and a second charge bridge to access the capital now. The analysis showed that the second charge option was the most expensive, that waiting was optimal if the franchise could wait, and that paying the ERC was justified if the franchise timeline was firm.
The Outcome
After reviewing the analysis, the client proceeded with the immediate remortgage, paying the ERC. The franchise launched on schedule and the business generated sufficient return to recover the ERC cost within the first year of trading. Key highlights: Three-scenario cost analysis presented to client; ERC vs opportunity cost weighed - client fully informed; Franchise launched on schedule - ERC recovered in year one.