Summary A food ingredient supplier had its offshore payment terms tightened without warning. Mid-restructure and already having been issued with a formal breach letter from their bankers, its bank refused to extend funding to accommodate the change in their working capital cycle.Lock Finance provided import finance and working capital secured against business assets. The business completed its restructure and emerged stronger.
When the terms changed
The food industry runs on ingredients you can't see. Behind every product on a supermarket shelf sits a supply chain of commodity inputs, mostly paid for long before the finished product ever reaches a retailer.
Timing matters in business. Not just when you sell, but when you pay.
A food ingredient supplier was caught out when their overseas supplier changed payment terms, demanding shorter payment cycles. In the normal course of business they could have adapted, but they were going through a strategic restructure to improve margins. Which meant additional restructuring costs in the short term, and no ability to change payment terms with their customers.
Having to pay their international supplier earlier would have meant raising more equity to meet the additional requirements as the bank was not prepared to assist.
A good business, on paper looking like it wasn't
This is the moment that tests a management team. The business was fundamentally sound. The strategy was credible. The restructuring costs were temporary and the numbers would recover. Management knew this. They could demonstrate it.
But the bank underwrites on audited financials, not on forecasts and conviction. A business mid-restructure looks worse on paper than it does in reality. Covenant breaches trigger a tightening of credit policy. The relationship manager may have believed in the business. That belief had limits.
Then consider the import finance requirement. Most banks lack the appetite and internal frameworks to structure it. For a business already in technical breach, the answer was straightforward: no.
Without unencumbered property to pledge, the bank's toolkit was exhausted. Once a borrower breaches covenants, a bank's priorities reorganise. Capital preservation moves to the front. The customer becomes a problem to be managed rather than a business to be backed.
So what would you do? The financials are temporarily distorted. The bank is out. You have suppliers demanding faster payment, customers you can't afford to pressure, and a restructure you need to see through. You know the business is good. The question is whether anyone else will.
The owner's move
Management did what good operators do under pressure. They were open about the position the business was in, precise about the path forward, and active in finding a funding partner capable of making a different assessment.
That meant looking beyond the bank. It meant finding a lender that would assess the business on what it owned rather than what its recent accounts showed — one that understood import, working capital cycles and finance and was prepared to hold a position while a strategy played through.
A different kind of lender
Lock Finance structured a combination of import finance to cover the accelerated offshore payments, and local working capital facilities to support operations through the restructure. Both secured against business assets. No property. No covenant compliance required.
The management team's transparency was central to the deal. Lending through transition requires a view on the people steering the business as much as the numbers describing it. Lock Finance is risk-aware, not risk-averse. Risk awareness demands a judgement call. This one was straightforward.
The result
The business completed its restructure. Freed from managing a deteriorating bank relationship, management focused on execution. The strategy played through. The numbers recovered. What looked like a business in difficulty turned out to be exactly what management said it was — a good business going through a change.
For businesses in transition
Restructuring costs are temporary by definition. So are the metrics they distort. For businesses with strong underlying assets and a credible path forward, the limiting factor is rarely the business itself. It is finding a lender prepared to read past a difficult period to what lies on the other side.
