The background & problem:
A company that operates in the food manufacturing industry had been trading for a few years with turnover of approximately $1.5m. They have just been approved by the 2 major supermarket brands to supply them with their product. This would immediately double their revenue. This was great but who would they look to fund this growth. The terms they have with their main suppliers were 7 days due to the products they offer but their clients payment terms were 20th of the following month. The business has been funded up until now by one of the main banks with a term loan and an overdraft of $50k. The business term loan and overdraft along with the owners personal mortgage added up to 80% of their property value. The business needed a larger working capital facility to assist with the increase in sales to ensure that they could still pay their suppliers on time and the additional overheads required to manage the increased turnover.

The bank was not able to assist with an increase in their overdraft as the owners had no more room left on their mortgage in which borrow against. The bank would not value the assets of the business but wanted to wait for at least 12 months to see the financial results which would confirm the increased sales, ongoing profitability and equity of the business. Then they may look to provide some business funding based on the business and not their house.
How was the business going to pay their suppliers every 7 days when they were not getting paid until the 20th of the following month. They needed to pay higher weekly wages and other increased costs that come with the big increase in revenue.

Solution:The business was referred to Lock Finance by their Accountant who identified that the best solution was to establish an Invoice Finance facility which would look to release cash weekly against the invoices that the business generates. The invoice finance facility was an additional facility as we only use the businesses invoices as the main security. The facility matches the businesses growth, so as they sell more their facility increases.
This facility has allowed the business to finance their growth without the need to use property security or to sell a share of their business in which to raise more cash.