Half Baked

The Company
This Midwest company was founded in 1996 as a small bakery and manufacturer of pastries and baked goods serving local and regional coffee shops. In recent years, the business owner invested in the development of a gluten-free production line.

The Situation
To support the manufacturing of the gluten-free line, the owner needed to lease more space in the building that housed the bakery. Not only was the gluten-free line coming on, but a new Sales Manager was bringing in Purchase Orders from some national big box stores and more space and working capital was needed quickly. With the bakery’s up and down cash flow history, its bank didn’t want to increase their line of credit and referred the owner to a factor to help fund its growth. The owner, working with a consultant, believed that an asset based finance arrangement was better than factoring.

The Solution
The consultant contacted Celtic Capital’s business development officer (BDO) for the region about securing A/R and Inventory lines of credit. When the BDO looked at the deal, he found another way to structure the financing that would provide a larger line and more availability. As the inventory didn’t support a substantial amount of availability, and knowing that an A/R line wouldn’t provide enough capital, the BDO took a look at the equipment and knew that was the answer. He proposed on an A/R line and a Term Loan in place of an Inventory line.

The Result
With Celtic Capital’s asset based deal, the owner is able to fund his growth as he diversifies his product offerings and customer base. Additionally, he takes advantage of the equity in his equipment which he can pull out and use to fund future expansion.