TradeCap Partners provided a $4.7MM purchase order facility to a California-based, branded consumer goods company.
The facility was structured to satisfy increased working capital needs related to seasonal Black Friday and holiday pallet programs with a national wholesaler.
The company’s supply chain comprised a mix of several international and domestic suppliers, a contract filler and third-party packaging and fulfillment warehouse, all of which had different payment terms. Although some longstanding suppliers had agreed to extend terms to the company, others did not. The size of the program and lengthy production lead times created additional capital needs to make payments to suppliers not offering terms and keep other suppliers within terms through completion of the programs.
Initially, the company turned to their non-recourse factor for help. The additional capital requirements to fulfill the programs could not be accommodated through a traditional over-advance. Further, the incremental single-debtor exposure presented concentration risk to the factor.
TradeCap was recommended by the factor and the company’s CPA firm to structure a flexible solution around the payment terms of multiple suppliers and complex logistics involving the movement of collateral through multiple third-party service provider locations.
_x000D_
Since the factor was also lending against inventory, segregation of the program specific inventory was critical to paving a path forward to financing the programs. TradeCap worked closely with the company, its supply chain partners and factor to resolve co-mingling issues, structuring the flow of program specific inventory through separate locations. An intercreditor agreement was established with the factor carving out the purchase orders and related transaction collateral associated with the programs.
TradeCap’s solution involved structuring payments to both international and domestic suppliers using a combination of cash payments and payment guarantees. The purchase order facility provided overseas suppliers with payment against shipping documents and domestic goods suppliers were paid on maturity of terms extended to keep a consistent flow of goods in-transit to the contract filler. The filler was paid upon completion of services and payment guarantees were provided to the third-party packaging and fulfillment supplier allowing them to produce retail packaging, pay for fulfillment services, palletize and ship to complete the programs.
Clinton Stanton, managing partner of TradeCap commented, “TradeCap’s ability to finance large programs involving international and domestic suppliers and the movement of collateral to and from multiple locations evidences the scope and flexibility of our finance solutions.”
