Debtor finance for UK businesses from Cashflow UK - the debtor finance specialists
Wholesale Paper Merchant
This company had been established 2 years earlier as a regional supplier of quality paper. Although losses over this period exceeded the original budgets, these had been underwritten by a top quality management team committed to making their plan succeed. Unfortunately, their funder didn't share their enthusiasm and we were called in to help.
Capitalising upon excellent systems and a well-run sales ledger, we arranged for the board and an invoice discounter to meet the day after our introduction. We believed it would be vital for the decision makers to spend time together before the due diligence process and this proved decisive in bringing about a satisfactory conclusion; a confidential invoice discounting facility based on 85% prepayments (a £1m uplift on the previous funding line).
This business had been subject to a management buy-out (MBO) three years before our introduction, having seen a once dominant market position eroded by complacent management and the withdrawal of working capital facilities by a struggling parent. The MBO was financed out of working capital (invoice discounting and bank overdraft) rather than equity, and hit problems after just 6 weeks when the main funder refused to allow the first tranche of deferred consideration to be paid.
With the directors keen not to default on the buy-out terms, they were made to repay the deferred consideration of £1m as well as the £2m working capital facilities over the following 9 months. This was largely financed by trade creditors and a replacementinvoice discounting facility capped at £750k. Over the following 2 years, the restrictions imposed by the £750k limit, together with the refusal of the discounter to finance stock, resulted in unfulfilled pre-sold orders and continuing losses.
Following a request from the discounter for us to help, the following package was put in place; a factoring facility with £1.3m funding limit, stock finance, a promise to review a return to invoice discounting after 3 months, and a trade finance facility to fund pre-sold orders to creditworthy buyers.
Additionally, we introduced:
- New accountants (the incumbent auditors had done little to help since brokering the MBO finance for a substantial fee);
- Venture capitalists to consider institutional investment;
- Restructuring specialists to counsel the directors on insolvency issues.
This business distributes beers and alcohol to the licensed trade. Established for twelve years they were embarking on an expansion plan set to increase turnover by 40% in the forthcoming year. To achieve this it was imperative that they had a lender that would work with them in implementing this strategy.
We were able to quickly commission an independent audit of their sales ledger and immediately thereafter introduced an appropriate lender, who relied on the report rather than carrying out an audit of their own. The facility was paid out within three days.