A small food manufacturing company was earning about $1.5 million annually. Their hard work paid off when they landed contracts with two big supermarket chains, promising to double their income!
However, a challenge arose: They had to manufacture the products before selling them, which meant buying more raw materials. Suppliers requested payment within 7 days. Yet, supermarkets took 20 days to make the payment. This created a cash flow gap of at least 45 days.
The owners borrowed money from their bank to start and run their business. They used their personal property as collateral, which made up 80% of its value. The business needed a bigger cash buffer to pay suppliers, handle overhead costs, and manage unexpected expenses due to rapid growth.
The bank wasn't able to raise their overdraft due to its policies. The bank didn't have any additional collateral. They also didn't want to accept business assets because those were already part of their existing loan. They also needed a year of increased sales data before they would lend more.
The owners had limited choices: sell some of their business, borrow from family and friends, or negotiate with suppliers. Each option meant losing some control and profits.
This common problem ironically penalizes growing businesses.
Fortunately, their accountant suggested invoice financing with Lock Finance. With us, they could get cash against the invoices generated by the business daily. We only needed genuine invoices for the supermarkets as collateral - no personal assets.
The owners successfully fulfilled their new contracts, hired additional staff, and paid their suppliers on time. As they expanded, they secured better terms with their suppliers. With more orders from supermarkets, their invoice financing grew, providing more funds for their growth.
The best part? The owners didn't have to risk their property or give up business equity to expand. We were thrilled to help these entrepreneurs grow their business. It was a bonus that they could use some of the profits to reduce their personal mortgage.