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How NZ tech company Modica Group used a business loan to their advantage

Find out how Modica Group, a leading enterprise messaging platform, propelled their growing tech business forward with the help of a business loan.

4 minute read

An opportunity arose for Modica Group, a NZ tech company, to acquire their biggest competitor in NZ – and potentially quadruple their revenue. The purchase was the natural next step for the high-volume, commercial SMS messaging provider. But with a cloud-based business and few tangible assets, the group was unsure how to go about securing the large loan they needed to make it happen.

That’s where BNZ came in. BNZ’s Head of Tech Industry offered up an innovative lending package, providing the funds needed to buy out the rival company. The loan soon kick-started a period of remarkable growth for Modica Group – and a remarkable partnership with BNZ.

The start of a beautiful partnership

A short time ago, Modica were a significantly smaller tech venture, with a turnover of $5 million. They dearly wanted to buy out their largest competitor, who as it happened, wanted to sell for a reasonably large amount of money. With their sights set firmly on acquisition, Modica started exploring their options.

“We approached BNZ, fully expecting them to say no,” says Modica Group CEO, Stuart Wilson. “We were a tech company with no assets. But they did the maths, it looked good, and in a matter of days they structured a bespoke lending package.”

This enabled Modica to purchase their rival, and subsequently helped them grow from $5 million to $20 million turnover in just four years.

Working together on a strategic lending approach

After assessing the opportunity and crunching the numbers, BNZ provided Modica with a Customised Average Rate Loan (CARL)* to acquire the target. A CARL lets a business divide the principal into portions and allocate different types of interest rates to each. This helps businesses to manage their risk.

Modica’s loan was split into two portions – one paying interest-only, and the other both interest and principal*. For Stuart and the Modica team, this meant the ability to manage monthly repayments in a way that works for the business. “Our loan also has the added benefit that we can overpay and redraw,” he says. “That’s given us much more flexibility in terms of cash flow.”

Facing the challenges head-on

Traditional bank lending is based on tangible assets. And for a company like Modica, whose business is in intelligent cloud-based messaging platforms, assets are harder to define and are intangible.

“When you have no assets to guarantee lending against, it can be difficult for the bank to invest,” Stuart explains.

He credits the BNZ team, in particular Head of Tech Industry, Tim Wixon. Tim took the time to understand the business, calculate performance, and manage the risks.

“Tim has a unique position in the banking market,” Stuart says. “He takes his genuine insight into the tech industry, and leverages it to push emerging tech companies like ours forward.” 

Built for future growth

For Modica Group, a business overdraft has been a useful tool in helping fund rapid growth.

“It gives us the flexibility to jump on opportunities when we see them. So, we don’t have to miss out because of cash flow issues,” Stuart explains.

Soon after acquiring the rival company, it became clear that Modica’s outstanding growth meant they were also outgrowing their overdraft.

“Because our performance on our CARL loan was strong, we were able to multiply our overdraft by four with no problem at all,” says Stuart. “Our lending always had to give us room to grow, and BNZ understood that from the get-go.”

A stakeholder – not just a loan provider

With expansion into Latin America and Asia on the horizon, BNZ connected Modica Group with BNZ clients in a position to help fund the move. And as the company goes increasingly global, the BNZ team is on hand to help navigate the speed bumps that international finance can bring.

Adding a new dimension to the relationship is the fact that BNZ is also a client of Modica Group – with the two companies working together to improve customer insights and reduce fraud. “We share monthly reports, new customer acquisitions, strategic plans, and financial performance. They really are a true banking partner,” says Stuart.

As Modica Group moves into a new and exciting phase of growth, having a banking partner like BNZ in their corner is proving invaluable. For corporates seeking funding for their own future plans, Stuart recommends getting in touch with BNZ’s Head of Tech Industry and/or the Corporate Finance team. “They’ve listened to us, taken the time to understand what we do, and backed us all the way,” says Stuart. “So, have those conversations. You’ll be surprised at what you can achieve.” 

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* Lending criteria, terms and fees (including an establishment fee and early repayment fee) apply. Minimum loan amount for CARLs are $1M.

** Lending criteria, terms and fees (including an establishment fee) apply. Ratelock fees may apply.

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The information in this article is provided for general purposes only, and is a summary based on selective information which may not be complete for your purpose.  To the extent that any information or recommendations in this article constitute financial advice, they do not take into account your financial situation or goals and is not intended as personalised financial advice. While BNZ has made every effort to ensure that the information provided is accurate, you should not rely on this information to make any financial decision without first having sought advice specific to your circumstances from an authorised financial adviser. Neither BNZ nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this article.