Daily News: September 9, 2014

King Trade Provides Consumer Electronics Importer PO Facility

King Trade Capital announced the recent funding of a $10 million purchase order finance facility for a New Jersey-based importer and distributor of consumer electronics.

The company’s bank contacted an asset-based lender seeking an alternative source of financing for a new product launch, which was backed by purchase orders from an investment-grade retailer. The ABL quickly realized that purchase order financing was a viable option given the size of the orders and early life cycle of the business, and the company was introduced to KTC.

The product is licensed from a well-known national consumer marketing organization and the product is an integral part of a major campaign to millions of the organization’s members worldwide. The product roll out was supported by a Who’s Who of technology companies, including a direct investment from one of the country’s largest technology companies, which also developed components and software associated with the electronic device.

The retailer’s initial load-in orders were too large for the company’s supplier to extend open credit. As a credit enhancement, KTC established a facility that provided financing with an advance rate equal to 100% of the cost of the inventory needed to fulfill the orders as well as funding for freight, duty, and logistics costs as required.

The solution provided by KTC enabled the company to eliminate the mezzanine and equity options they were evaluating due to the availability provided by KTC’s facility against pre-sold inventory. As a result, the company was able to raise the capital needed through KTC’s alternative finance structure, preventing dilution of the existing ownership interests, which was much more favorable to the owner-operators.

KTC established an intercreditor agreement with the supply chain finance division of an international bank, allowing the company to finance their entire trade cycle and enhance the cash flow of the business during the upcoming holiday season. Consequently, the company will be able to meet the delivery timeframe of the new product launch with the retailer, laying the groundwork for future expansion within the major retail chain as well as other major retail channels.