Term Loan 1st, A/R Loan 2nd, Inventory Loan 3rd Was the Right Combination For This Company
This Company is a Colorado-based wood mill and veneer manufacturer. It was started in March 2019 by industry veterans. The owners put up a significant amount of their own money to buy the manufacturing plant and equipment, and to set up a mill.
The Company began operations but the build-out of the plant needed to be completed. A regional bank referred the owners to us for the financing necessary to finish the project and at the time we came in, the Company had a great deal of equipment (not all operational), a minimal amount of receivables (A/R) and no inventory controls.
We first took a look at the A/R and the equipment. The reason the A/R was low was because each time a new phase of the build-out began, operations had to stop. Our proposal with equipment, A/R and inventory components was structured to finance the equipment first to enable the owners to continue the build-out. The biggest challenge with the equipment was that the owners wanted more money than we proposed. We agreed to have an appraiser of the owners’ choosing (one very familiar with saw mills and veneer plants) to see if he could come up with more money; however, that appraisal was very late in coming and ultimately, incomplete. The owners agreed to go with our original proposal, and we agreed to re-evaluate the equipment once the build-out was completed and the mill (and all equipment) was fully-operational. Our deal consisted of a $1,600,000 Term Loan, a $2,000,000 Accounts Receivable Line of Credit and a $500,000 Inventory Line of Credit. Normally we wouldn’t do a Term Loan on equipment that’s not hooked up and operating but we did in this case because of how much we believe in the owners’ experience and expertise, and that they’ve backed up the business with their own money.
The Term Loan funded and the build-out is underway. We’re targeting to fund the A/R in either the first or second week of December. Because of the owners’ industry experience, the plant is being built to optimal performance. They believe that once everything is fully operational, there will be a large upside and that business will be theirs for the taking.
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.