In this case study we’re taking a look at a property development company that was in need of a treasury management strategy, to minimise the negative impact of cash drag. Here’s how they ended up maximising their returns by investing with Squirrel.
Term deposits an option, but low returns
This Investor had raised the capital it required from its shareholders upfront to reduce its business and settlement risk. They modelled their 2-year cashflow requirements to meet due diligence costs, settlements and the planning and consenting work. The Investor considered using a mix of term deposits to limit the “cash drag” but found the expected returns to be disappointingly low.
Then they approached Squirrel
By becoming an investor on Squirrel’s platform, they got:
5%p.a. returnsBy investing in a portfolio of Residential Construction Loans with an expected to return (before tax) of 5%* per annum, they were able to maximise the return on their strategic cash holdings.
Monthly repaymentsThe investor received monthly income payments that were paid into their Squirrel On-Call account. They had the choice to either reinvest the income or transfer the interest to their bank account.
The ability to withdraw their fundsTheir forecast cashflow determined when it would need to draw down capital from their portfolio. When the time came, the investor leveraged Squirrel’s secondary market and passed its investments on to others in time to have the cash needed for their development project.
Reduced investment riskThe investor benefited from Squirrel’s Reserve Funds which are intended to cover expected credit losses as well as offer greater predictability to investors.
Investing with Squirrel meant this investor was able to earn higher returns on their capital, which generated an income towards monthly expenses, generating savings in the capital they were required to ‘burn’ every month.
They were also able to model their cashflows and manage their cash portfolio to suit their changing needs. They had visibility of when their interest payments would come through and they were able to choose whether to reinvest or withdraw their income.
Having access to the secondary market also meant they were able to sell their investment without any cost or penalty, allowing them to quickly take their money out to meet an unplanned cost.
Squirrel offers Wholesale investors a range of options than can be tailored to meet Investor’s needs. You can contact Doug Thomson to learn more about Squirrel and how Squirrel can assist you enhance your return prospects.
(* this was the prevailing rate offered to investors during this period)