Bread and Butter
The company is a California-based distributor of office furniture with three owners, each specializing in a different aspect of the business. The business had been profitable for many years and followed its banker to many banks.
When the economy slowed, sales declined, profitability quickly became a thing of the past and everything began to fall apart. Inefficiencies (poor books and records, poor reporting systems, substandard credit and collections policies) previously hidden under a guise of profitability were revealed. Due to losses, the banker had no choice but to ask this client out. With an over-advanced position with the bank, shoddy record-keeping and owners losing interest in the company and unwilling to put up personal guarantees, numerous asset based lenders passed on this deal.
Celtic Capital, with a reputation for tackling the tougher deals, was the only asset based lender approached that was willing to work with this company. During a post-audit meeting, a framework was developed for establishing reasonable reporting systems, an updated collections policy was created and collections procedures were developed. When presented to the bank, the bank’s senior management was willing to work with the owners to resolve the shortfall issue. At that point, Celtic Capital provided a $1,000,000 A/R line and the company set its new plan in motion.
Once the systems clean-up was instituted, significant results were apparent within weeks and the company took on a new vitality. The company had focus, the owners were empowered and a new lender (Celtic Capital) was on-board to help bring the business back to profitability.