PA Machine Shop – A Deal With Many Moving Parts
The Company
The Company is a Pennsylvania-based precision CNC machine shop that was established in the early ‘80s. The majority owners are a husband and wife who also run the Company.
The Situation
Hurt by the pandemic, the Company’s bank asked it out due to covenant violations. The bank wanted to be paid off on both the Company’s credit line and real estate loan on the owner-occupied building at the same time. That turned out to be difficult due to some unexpected moving parts.
While the owners found someone to buy the real estate (enough to pay off that bank loan), we were asked for an Accounts Receivable (A/R) Line of Credit and Equipment Loan to pay off the bank line. When we looked into the equipment, while 40%-50% was encumbered, we saw that we could lend on the rest and that, combined with the A/R, was enough to take the bank out of the credit line. We found, however, that there was a junior lender holding two liens on the assets (one large, one small) and would not subordinate to us.
The Solution
We negotiated with both the junior lender and the bank leading to the following: The junior lender agreed to a payoff of its larger lien and would subordinate the smaller lien. The bank agreed to have its credit line paid off before the real estate payoff. At that point, and just before the holidays, we provided the Company with a $500,000 A/R Line of Credit and a $630,000 Equipment Loan.
The Result
As soon as the real estate loan closes, the owners will realize the extra availability the Company needs. The owners expect a much better year ahead with an uptick in business once we’re out of the pandemic.
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.