Anyone who has spent time following the business of F1 in recent years will have come across comments from former McLaren team principal Ron Dennis about how his company was debt free. In 2007 he said "we are debt-free, so obviously we are a very strong company with phenomenal growth."

Likewise, in September last year, on the announcement of McLaren's new MP4-12C supercar, he described the company as being "skilled, solid, debt-free and risk-managed." So you can bet your bottom dollar that McLaren wouldn't have taken on a hefty bank loan without good reason and, as Pitpass' business editor Chris Sylt reports in the Independent this is exactly what has happened.

In May this year the McLaren Group, which owns the F1 team, took out a loan of over £40m from HSBC and this wasn't spent on fuelling its on-track title challenge. Instead it is being used to build a new factory on its site in Woking which will produce the MP4-12C and create 300 jobs. It is an admirable feat in the current economic climate and is a pretty big gamble to boot as it is the first time since 2005 that the McLaren Group has had over £1m in bank loans.

The F1 team is not just McLaren's flagship but it is also the Group's biggest revenue generator. Prize money and sponsorship from blue chip brands such as Vodafone and Mobil 1 fuelled the team's turnover in 2008 to £169.9m. This comprised 64% of the Group's overall revenues so why is it staking so much on road cars?

McLaren Automotive, the Group's road car business, was established in 1989 to produce the McLaren F1, which was priced at £640,000 and held the title of being the world's fastest production car until 2005. Only 100 cars were produced and in 2008 road car sales brought in £91.4m to McLaren compared to Ferrari which had revenues of €1.9bn from brand licensing and selling 6587 cars in the same year. This rivalry with Ferrari is part of the drive behind McLaren's road car expansion.

At this year's German Grand Prix McLaren team principal Martin Whitmarsh admitted that "the biggest brand in Formula One today is Ferrari... They have got 60 years of heritage, lots of world championships. Rather than me be jealous of it or pretend its not there, it's much better to say they are fantastic, they have achieved so much, but we want to beat them one day...It might not be even in my career but in 10 years, 20 years time why can't we be the biggest brand?"

The MP4-12C will go some way to meeting this goal. The car will cost up to £175,000 and McLaren plans to build 1,000 in the first year alone giving it 1-2% of the global high-luxury sports car segment. In preparation for this, McLaren Automotive has since been spun out of the McLaren Group.

McLaren Automotive is offering a 48% stake in the business to private investors with the remainder of its shares split between Dennis, the Swiss TAG Group and the Bahraini Mumtalakat sovereign wealth fund. The three of them jointly own the McLaren Group and in November last year they agreed to buy back the 40% stake which German car manufacturer Daimler owned in it.

Dennis, Mumtalakat and TAG paid an estimated £200m for Daimler's stake and the trio has yet to buy all the shares back. The HSBC loan will help them out with this as a McLaren spokesman says that in addition to funding construction of the new factory, the debt will also "provide head room on its facilities to assist in the buyback of the remaining Daimler shares by the end of 2011."

The loan is secured on McLaren's intellectual property, cash in the bank and its land and buildings which alone comprised 78.7% of the £246.3m book value in 2008 of McLaren's fixed assets. The spokesman adds that this security is "an effective way of reducing the risk to the bank and thus the interest margins charged on the debt."

The new factory and site are owned by the Group as an investment property and will be leased to the automotive company. This will bring in additional revenues to the Group to pay off the debt and since HSBC's finance is a three-year package it may not be long before McLaren is back to being debt free.