Lock Finance were introduced by a commercial banker to a labour hire company. The labour hire company was only a couple of years old but was growing well and was forecasting to double it’s revenue in the following year. The bank advised that they could no longer provide an increase in their client’s overdraft facility as the directors personal property had no more equity in it to allow the bank to increase their facilities. The business has not large tangible assets and the largest asset was its debtors ledger. The bank placed a very low value on the debtors.
The labour hire industry needs to pay its contractors weekly and when debtors do not pay until the end of the month following then the business needs to have a cashflow facility that can support their weekly requirements. PAYE / GST is also a large component of their cashflow requirement which they were getting behind on. They had an approved arrangement with the IRD for some arrears of $60k. They could not be late on their current IRD commitments.They required a larger facility to assist with this.
The bank was providing a $200k overdraft facility. The client was regularly exceeding this due to the growth they were achieving. The bank did not look kindly at this and were suggesting that the client look to an Invoice Finance facility where the facility and access to cash would grow with the increase in revenue and debtors ledger.
The bank recommended Lock Finance as a valid option to assist.
From a debtors ledger of $600k we were able to provide a Non disclosed invoice finance facility of $700k to assist with their growth. We were able to release up to $480k against the $600k debtors ledger (80%). We were able to repay the banks overdraft of $200k and allow the client to repay in full the $60k owing to the IRD. After those two repayments they still had an additional $220k.
The client is now very happy that they are being funded by someone that has significant experience in cashflow finance and understand their business financing requirements. Especially a facility which will allow the business to continue to grow.
Getting access to cash within 24 hours of invoicing has been a life saver for them.