Industry
Financial Services
Challenge
The client required acquisition funding to purchase an established mortgage trail book, with the transaction needing to be structured around the value and cash flow of the underlying asset rather than traditional property security.
Results
Fifo Capital participated in a $3.8 million acquisition facility, providing a $1.3 million business loan secured against a high-quality mortgage trail book with strong recurring revenue and multiple exit pathways.
Key Product
Business Loan
The Challenge
The client identified an opportunity to acquire a substantial mortgage trail book with a long operating history, strong client retention, and recurring commission income.
Unlike traditional business lending, the transaction involved the acquisition of an intangible asset rather than property or physical assets. As a result, the funding structure needed to accommodate:
- Acquisition of an established mortgage trail book.
- A newly established acquisition entity.
- Ongoing servicing and management arrangements.
- Dependence on recurring commission income as the primary repayment source.
The key requirement was a lender capable of understanding mortgage trail book valuations, cash flow dynamics, and the structural protections required to support the transaction.
The Solution
Fifo Capital participated alongside a specialist co-lender in a $3.8 million acquisition facility, contributing $1.3 million towards the purchase of the business.
Rather than relying on property security, the transaction was structured around the underlying value of the trail book and the cash flow it generates.
The facility was supported by:
- First-ranking AllPAAP security over both the acquisition entity and operating business.
- A lender-controlled payment structure directing trail commissions before they reached the borrower.
- Corporate guarantees from the operating business.
- A deed of subordination restricting capital leakage from the structure.
- Ongoing reporting and performance covenants.
For brokers, the most notable aspect of this transaction is that there was no property security supporting the loan.
Instead, the credit decision was driven by:
- A mortgage trail book valued at approximately $5.8 million on a conservative basis.
- Approximately 2,500 active loan accounts.
- Annualised trail commission income of approximately $2.3 million.
- A borrower LVR of approximately 65% against the independently assessed trail book value.
- A recurring revenue profile supported by predominantly seasoned residential mortgages.
The structure also benefited from continuity of management, with the original operator remaining responsible for day-to-day client management and servicing activities following settlement.
The Results
The facility enabled the client to complete the acquisition of an established mortgage broking business while preserving the recurring income streams that underpin the asset value.
The transaction delivered:
- Funding for the acquisition of a substantial trail book.
- A structure aligned to recurring commission income.
- Strong security through lender-controlled cash flow arrangements.
- Multiple exit pathways including ongoing amortisation, refinance, or sale of the trail book.
- Continuity of operations through the retention of existing management.
This transaction demonstrates Fifo Capital's ability to support brokers and investors pursuing specialised acquisitions where traditional property security is not available, but the underlying asset generates strong recurring cash flow.
Ready to fund your next opportunity? Apply for a business loan online today.
