A well-established manufacturer of printed labels has secured a critical finance deal to help sustain the company after a series of bad debts hit the business.
The leading supplier of self-adhesive labels and stickers worked with Reach Commercial Finance to structure the package of support after an introduction from their accountancy adviser.
With bad debts impacting on cash flow one of the company directors had put more of his own money in to ease the burden on the working capital – which was a commendable show of commitment in difficult circumstances – but unfortunately the incumbent lender was nervous about the quality of the receivable and wanted to exit.
So Reach took on the challenge on to replace the invoice finance funding line as well as an outstanding loan with a new lender.
Leading the Reach team Gary Cain explained the journey with the company: “Having initially approached two funders and selected the most favourable in terms of flexibility matters progressed normally until formal credit approval was needed.
“The receivable quality was an issue and together with the impact Covid-19 was starting to have on the wider economy the lender decided the deal was not for them and pulled out.
“Having to replace the lender under such challenging circumstances wasn’t easy. At the time many funders were understandably focused on looking after their existing portfolio rather than adding new business.”
Working hard to present the quality of the opportunity with the assistance of a supportive new funder – Close Invoice Finance – and armed with the ability to introduce a Coronavirus Business Interruption Loan alongside a receivables lend – Reach did manage to get a really creative deal structure to assist the business in the end.
The solution was a Confidential Invoice Finance deal set with an upper limit of £700,000 of funding but with, remarkably, a prepayment level of 100% against the invoices.
Gary again: “The flexibility of this deal being structured with a CBILS meant that we were able to effectively ‘top-up’ the lend beyond the usual prepayment % in this sector.
“We are delighted with the outcome. Under very unusual circumstances we managed to structure a really flexible offering for the client that facilitated an exit from his incumbent lender and introduced a new lender, who was highly supportive in a time of real need.
“The use of a CBILS alongside the receivable to ‘top-up’ the level of prepayment helped structure the deal and more importantly led to the introduction of c£200k of additional cash.”
Reach Commercial Finance is an independent financial brokerage with a wide range of experience in helping limited companies and corporate entities secure funding.