We were approached by a London based manufacturer of in-flight meals to the airline industry. They had experienced several years of difficult trading due to the loss of several high-value contracts, and as a result, had to go through an extensive exercise of cost-cutting. Despite this, they still showed a weakening balance sheet in addition to several years of losses.
Having traded through this period, they managed to successfully tender for new contracts and the business was anticipating rapid growth on the back of these.
However, due to the losses, their bank was unwilling to increase their overdraft. Consequently, they were finding it very difficult to fund the new contracts they had won, as the payment terms from the debtors ranged from 60 – 90 days.
We had previously helped refinance their warehouse machinery onto better terms when they were reducing costs and they approached their previous account manager to help relieve their cash flow pressure.
We met with the managing director and his financial controller to understand their financial projections in light of the new contracts. This ensured that we knew how a facility would need to be structured to meet their future funding requirements and meant that we could quickly target specific lenders.
We recommended a confidential invoice discounting facility, this would allow the business to retain control of their ledger and the relationships with their debtors, whilst leveraging against their sales to provide the cash flow they needed.
We also recommended that only the 4 main contracts would need to be funded against and all other debtors excluded. This isn’t standard in the industry and was only possible due to our excellent relationships with lenders. This still provided the cash they needed, whilst keeping the costs of the facility as low as possible. To help secure a credit backed offer quickly, we put together a new business proposal for the lenders and were able to present an offer of a facility within a few days of introducing it to the market.
Our asset-based lending team consists of specialists who have worked directly in the invoice finance industry. Because of this, we were able to meet with the managing director to talk through and impartially explain the offer, so that they were comfortable with what they would be entering in.
The business then completed a few days later. They received an initial £540k injection of cash against their existing ledger, with a further 85% of the value of each new invoice being advanced on the same day that the invoice is issued to the debtor.
The business has continued to grow on the back of the cash is advanced, and we continue to work closely with them, providing free advice on all renewals to the facility and any amendments that need to be made.
“Richard and his team at Oakmead were exceptional (again). They are a trusted source of advice for us.