First Factor

Funding rapid growth

A Home Counties producer of organic fruit and vegetables saw their sales grow by almost 30% in the space of 12 months on the back of the increased popularity of this type of produce. Clearly, this was good news but brought with it significant challenges particularly relating to cash flow. There was an inevitable increase in overheads particularly for wages with headcount rising from 20 to 25. Also some key customers, who were mostly wholesalers, demanded increased credit terms to help ease their own cash flow problems. In several cases they requested a move from 30 day to 60 day terms.

Solution

We were able to source a Factoring deal for this Client which provided for their increased working capital needs. Also, as is normal with Factoring facilities, the cash flow demands of further projected expansion in response to expected increased demand were also catered for. As turnover and the value of the book debts grew the availability of cash from Factoring would also grow. Furthermore, the Factoring company of course took over the management and collection of the debts owed to the Client providing the release of much needed time for an overworked accounts department.

One particular challenging issue for this deal related to Concentration. The Clients’ top customer represented around 50% of the value of the overall debtor book. Many Factoring Companies dislike providing funding where Concentration is more than 30%. The provider involved was willing to allow Concentration to 50% based on their assessment of both the organic produce industry generally and the top customers’ credit worthiness specifically.
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Inter-factor Transfer

A Midlands’ based manufacturer of bearings had an Invoice Discounting facility with a major High Street Bank. They provided a wide variety of bearings for a range of different industries. They allowed a former director of the company to set up a business in premises on their site which they leased to him. His business made components for the automotive industry and grew quickly. He sourced most of the required bearings from his landlords and soon became one of their key customers. The Invoice Discounting provider decided to exclude this debt from the facility because primarily they were of the opinion that the relationship was too close to allow a truly independent trading relationship. This had an increasingly damaging effect on cash flow.

Solution

We arranged the transfer of the Invoice Discounting facility to a smaller independent provider. They took a detailed look at the relationship between the two parties and decided that the two companies were trading independently and they allowed the inclusion of the relevant debt within their facility. The also matched the former provider on rates. Both companies are continuing to trade successfully.
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Acquisition - Management Buy-in

A family run engineering company, based in Lancashire, had been established for almost 20 years. The directors were husband and wife and the founders of the business. They decided it was time to retire and sell the business to provide capital for their retirement. The had two sons working in the business who, whilst wishing to retain employment with the company, were not keen to take on the purchase.

Solution

A proposed buyer was found who had significant engineering experience. We were able to source a flexible finance package which included a loan and a Factoring facility. A key issue was finding appropriate security for the required finance and using the debtor book to support the raising of working capital via Invoice Finance proved to be highly efficient. The new owner also had the peace of mind that collection of his business’ debts would be professionally handled.
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Start Up

A newly formed Yorkshire company of website designers faced the common problem of having insufficient capital to properly establish and develop the business. Projects for customers often took a number of weeks to complete with no stage payments. In addition trade terms of 30 days from month end were the norm. Cash flow was therefore particularly tight.

Solution

A factoring deal was put in place to advance 85% of the value of sales. This significantly improved the cash flow of the business and provided the much needed working capital for the proper establishment and expansion of the business. The provision of a debt management and collection service meant that the management and staff could devote more time to the pursuit of new business. As a new business, any significant level of bad debts would almost inevitably have brought about the failure of the company so debt protection was built into the facility to guard against this contingency.
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Management buy-out

The founding director of a well established London based advertising agency was looking to retire. In the 20 years since he had established the business good growth had been achieved and an excellent quality management team had been established. The original director had been preparing for retirement by taking more of a back seat. He divested his responsibility to the team and two senior managers that had been groomed to take the business forward. To this end a Management buy-out was negotiated and whilst the two new directors were able to input some funds from their own resources, an additional source for working capital was required.

Solution

We were able to source an Invoice Discounting facility to raise working capital against the business’ book debts. Invoice Discounting was the right solution as this was a long established company with a well resourced finance department who had good relationships with their regular customers. They had for many years successfully and efficiently collected their customer debts with a of low level bad debts. The Management buy-out proceeded successfully and the company had a confidential source of working capital which would allow for the expansion projected within the new managements ambitious plans for moving forward.
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