TradeCap Partners provided a $9 million production finance facility to an industrial equipment manufacturer, which will use the facility to help finance release orders issued under a large contract the company received from the U.S. government.
Prior to receiving the orders, the company was on track to grow revenue by 20% year-over-year. Growth was already putting pressure on cash flow and payables given credit limits with suppliers. It was imperative the production schedule stayed on track so equipment could be shipped by year end. Not only was the delivery timeline a requirement under the contract, it also coincided with fiscal year end debt service obligations. The incremental cash flow generated through fulfillment of the orders would satisfy the obligations and provide additional liquidity to support continued growth into the new year.
TradeCap went to work to underwrite the company’s production capacity, supply chain and cash flow. Simultaneously, TradeCap negotiated a carve-out subordination agreement with the company’s existing lender and an intercreditor agreement with a factoring company brought in to finance the resulting receivables related to the orders.
TradeCap provided a funding solution covering up to 100% of the direct cost of goods by making cash payments directly to suppliers for components and other project-related work in process inventory to be produced and shipped. Additionally, TradeCap supplemented cash flow by providing liquidity against specific inventory already received from suppliers related to the orders.
TradeCap’s production finance solution bridged the company’s incremental capital needs created by the additional orders received from the U.S. Government. It also enabled the company to continue meeting existing delivery timeframe with other customers. With TradeCap’s production finance facility and the newly established factoring facility, the company has the financial support to grow without diluting its existing shareholders or giving up on profitable sales opportunities.
“This solution required a lot of hard work, coordination, and several decades worth of purchase order funding experience to implement,” Bryan Ballowe, managing partner of TradeCap, said. “TradeCap’s ability to thoroughly underwrite production capacity and overall cash flow in a short period of time speaks to its proficiency and expertise.”
