Are you struggling with your current lending facility? This recent case may be of interest to you.
Switching lenders is problematic at the best of times. It is also often a necessary step in the evolution of a business.
In this case, a client who had been growing with an Asset Based Lender (ABL) for a period of two years began to suffer as a result of an industry downturn. As business slowed, the cost of borrowing remained disproportionately high due to the nature of fixed fees and monitoring costs as well as margining calculations associated with ABL lending. What was feasible in the prior business environment became problematic in the current environment.
As the company’s bottom line eroded, working capital was also restricted which jeopardized existing and future sales contracts. Upon review of the company’s financial situation, a two-step plan was proposed. Once our internal Information Memorandums were prepared, presentations were made to two distinct lending groups.
In order to deal with the immediate working capital concerns of the company, we started to work on a sale and lease back financing against unencumbered fixed assets. Within two weeks of the initial presentation, the company’s loan was secured in order to fulfill the immediate capital needs.
In order to deal with the immediate working capital concerns of the company, we started work on a sale and lease back financing against unencumbered fixed assets. Within two weeks of the initial presentation, the company’s loan was secured for the necessary capital to fulfill the immediate needs.
While completing the initial phase sale and lease back financing, two lenders were identified to provide the senior debt financing required by the company, one being the ABL’s conventional lending arm.
After meeting with the lenders and holding negotiations with both parties, the original lender preferred not to transfer the account to conventional banking. As a result, our efforts focused on delivering a senior debt package with the alternative Schedule A.
Within 90 days, the lender had funded an operating line and margined inventory, which exceeded the previous lender by a factor of 30% and saved the borrower over $150,000 in financial costs over the first year alone.
A changing economic landscape often forces companies to address the types of money it borrows. This example illustrates that outsourcing your corporate financial requirements can have a dramatic and positive effect on your business, in addition to gaining financial market knowledge, leverage, and experience. A financial solution not only ensured this company’s survival, but lowered overall costs and created a level of flexibility in keeping with their changing circumstances.