Rosenthal & Rosenthal completed a $3 million inventory production finance deal for an importer of dinnerware and glassware.
A New York-based importer found itself with larger than expected sales programs from both existing and new retail customers for the Fall and Holiday seasons. The company first reached out to its existing lender, the asset-based lending division of a regional bank, to help alleviate cash flow strain. While the existing lender was supporting the company with a $17 million overall facility, including an approved overadvance facility, the bank was unwilling to increase that overadvance to the level required. To further complicate matters, overseas suppliers that had previously granted open terms to the company were no longer willing to extend those terms, and now required pre-shipment financing to produce the company’s products on time.
Given the extraordinarily large seasonal inventory build, the client’s existing lender encouraged the company to pursue purchase order financing to assist with its increasing financing needs and recommended Rosenthal as a preferred partner. An inter-creditor agreement allowed for a smooth transition from purchase order financing back to asset-based lending once the related accounts receivable were generated as a result of the purchase order financing.
With Rosenthal’s $3 million purchase order financing facility, the client was able to obtain goods from multiple overseas suppliers by issuing letters of credit for both FOB Asia drop-ship programs as well as landed or port-of-entry programs. In landed or port-of-entry programs, Rosenthal provided financing for freight, duty and logistics costs, ultimately funding the required inventory at a 100% advance rate. With this more soundly structured solution, overseas suppliers would now have the credit enhancement they required to ship the products.
By partnering with Rosenthal through the inter-creditor agreement, the existing lender did not have to increase its overadvance, and it was now in a position to have that overadvance repaid by the incremental cash flow generated through purchase order financing.
“It can often be difficult for banks, asset-based lenders, and factoring companies to provide increasing levels of seasonal overadvances that stretch collateral and inventory reliance within a borrowing base,” said Rosenthal Division Head Paul Schuldiner. “Rosenthal’s PO Finance team has a proven track record working in tandem with third-party asset based lenders, commercial banks and factors to facilitate funding solutions that minimize overadvances.”
