A Long Standing Bank Client Exits with No Hard Feelings
This Arizona manufacturer of snack foods has been in business for over twenty-five years and is still owned by the company’s founder. It sells its products to all of the large grocery chains including Kroegers, Fry’s and Trader Joe’s, among others.
The company was a long-time bank client. In 2016, one of its larger customers demanded a price reduction to which the business owner agreed. In 2017, when margins were negatively affected by that decision, the company posted a loss. The loss combined with the heavy distributions taken by the business owner swung the company’s net worth from positive to negative. At that point, the bank asked this client out.
Faced with having to find new financing, something the business owner hadn’t done in years, he brought in B2BCFO to help. The B2BCFO referred the owner to Celtic Capital but the business owner was adamant about staying with a bank as he was sure the business was still bankable. While other banks (ABL divisions) did submit proposals, the B2BCFO along with the business owner’s long-standing banker, helped the business owner understand the benefit of going with Celtic Capital – that being with us, he would have access to capital with no financial covenants attached; something not offered in the other proposals.
We provided a $2,850,000 facility – a $2,500,000 Accounts Receivable Line of Credit to pay off the bank and for working capital plus a $350,000 CapEx Line of Credit for new equipment.
The CapEx Line will help provide equipment the company needs to expand sales. That, along with the initiated and planned changes to increase margins, should enable this company to turn the corner late this year or next in terms of the P&L and the balance sheet should follow. This will get the company back to bank financing.
Not only did the company get the financing it needed, another important result is that teamwork, patience and a willingness to help this bank client understand what financing arrangement was truly in the best interest of the business led to a successful bank exit with no hard feelings.
About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.
As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.