The Company
An Eastern Midwest manufacturer specializing in precision steel punches used in the fabrication of pierce and blank dies for multiple industrial sectors, including metal fabrication and manufacturing.
The Situation
The Company faced significant financial pressure after experiencing losses and covenant violations with its bank. As a result, the lender requested that the Company refinance its debt and transition to a new financing partner.
When the opportunity was first referred to Celtic Capital, initial reviews of borrowing base availability appeared sufficient. However, during the audit process, a substantial shortfall was uncovered. The deficit was caused by the Company’s largest customer filing for bankruptcy, which materially impacted the accounts receivable base.
At that point, the Company had two potential paths forward:
- Request the bank to temporarily accommodate a portion of the shortfall, or
- Inject additional capital to close the gap and complete the refinancing.
The Solution
The ownership team ultimately chose to contribute additional capital to resolve the shortfall, with the final amount determined closer to closing.
The refinancing process faced several delays due to:
- Communication challenges among stakeholders.
- The requirement to establish a blocked account with another financial institution.
- Holiday-related timing issues.
After the blocked account was opened and a follow-up audit was completed, the transaction moved forward. The final documentation was executed, and the agreed-upon capital contribution was applied to eliminate the shortfall.
Celtic Capital structured a $1.75 million asset-based lending facility consisting of:
- $1,000,000 Accounts Receivable Line of Credit
- $750,000 Inventory Line of Credit
The facility enabled the Company to pay off the existing bank lender and secure working capital to support ongoing operations and growth.
The Result
Although the Company continues to do business with the customer currently in bankruptcy, management has taken proactive steps to stabilize operations. These actions include:
- Reducing operational expenses.
- Diversifying the customer base.
- Actively pursuing new revenue opportunities.
With the support of Celtic Capital’s flexible asset-based financing, the Company now has the working capital needed to maintain operations while executing its growth strategy.
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 more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset-based financing solutions from $500,000 to $8 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.
If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or mhafner@celticcapital.com, or visit us at celticcapital.com.