TradeCap Partners closed a $325,000 production finance facility to support a Michigan-based government contractor with a $635,000 fixed-price contract award.
The contractor had a performance history of delivering under small business set aside contracts. After a competitor shut its doors, the management team secured several contracts previously awarded to the competitor including a contract that was larger than the typical projects completed by the company.
Management’s familiarity with the contract and strong relationships with vendors allowed them to competitively price their bid and secure the award. However, the size of the contract created significantly higher working capital needs to satisfy procurement of raw materials, molds and other components to complete production.
The company issued purchase orders to vendors for long lead time components and began receiving other raw materials on terms. With longer lead time components nearing completion, the company needed additional financing support to make critical payments for those items and keep the supply chain flowing.
The owner of the company reached out to a factor they had previously worked with hoping they could solve the problem. The factor quickly identified a purchase order finance structure which would provide the support needed and introduced the company to TradeCap.
TradeCap expedited due diligence, closed and funded a production finance facility in just 5 days, ensuring there were no delays in the supply chain. The facility encompassed payments to 15+ suppliers and provided further availability to pay for direct labor associated with the manufacturing and assembly of goods being delivered under the contract. As deliveries are completed in stages, the factor will advance against resulting receivables to repay TradeCap.
The TradeCap facility also eased working capital constraints and will bridge the 120-day manufacturing timeline.
Clinton Stanton, TradeCap managing partner, commented “We are grateful for our partners in the finance community that turn to us as trusted advisors when seeking to help clients. This transaction highlights the added value companies receive when their financial partner’s primary motivation is to help their clients succeed.”
