Celtic Capital Works Out Unanticipated Liens and Loans Challenges

The Company
This company is a California-based manufacturer of tortillas, wraps and flat bread. It was recently acquired (December 2022).

The Situation
The new owner, a seasoned food industry veteran with vast experience and long-standing connections in the industry, has grand plans for expansion both in terms of adding product lines as well as bringing in new customers. He turned to Celtic Capital for working capital to fund that growth.

The Solution
What looked to be an easy, uncomplicated deal (no lender payoffs, according to the new owner) turned out to be anything but. The Company indicated they had an EIDL loan from the SBA and requested Celtic Capital to have it subordinated to the new line of credit. When Celtic Capital made the request to the SBA, the SBA declined as it hadn’t been made aware of the ownership change. Turns out the past owner had failed to inform them.

There were also three additional liens that related to a refinance of the building the past owner had done prior to selling the business. The past owner set about refinancing the building again to get the liens released from the Company. Once the building refi was completed, and the liens terminated, Celtic Capital was able to fund by reserving the funds for the SBA loan to give the owners (both past and new) the time to get the change made with the SBA regarding the Company ownership and then to resubmit the subordination request.

Lastly, we needed the past owner to sign off on a Landlord Agreement which he agreed to do concurrently with being paid off on some remaining debt the new owner still owed to him. Celtic Capital paid the funds at the closing, received the signed Landlord Agreement, and closed the deal with the new owner.

When all was said and done, Celtic Capital provided the Company with a $1,500,000 Accounts Receivable Line of Credit, a $738,000 Equipment Loan and a $500,000 Capital Expenditure Loan.

The Result
With our financing in place, all liens paid (or reserved for) and Agreements signed, the business is ready for the owner’s growth plan to take shape. 2023 looks to be a good year for this Company.

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.

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 www.celticcapital.com.