Maintaining a healthy cash flow is a critical factor for success in all businesses - especially those with long trade credit terms. A few weeks ago, we were approached by a client who had recently acquired a competing business and had done so without obtaining debt or selling equity, using significant company resources.
Keen to keep the business strategy in line with that of their existing portfolio, our client's recently acquired business was undergoing a strategic change that required liquidity. As such, the client approached us to explore viable options for raising funds and alleviating their cash flow constraints. After a thorough analysis of their financial position, it became clear that the business had significant strengths in the way of receivables - an asset we opted to leverage.
Recognising the importance of working capital to the business, we approached a select few lenders with the appetite to lend against a debtor's book with the type of counterparts they had. After explaining how invoice finance works and settling the clients’ varied queries, we negotiated the following terms:
- Facility: Circa £250,000
- Term: 12 months
- LTV: 80% prepayment against invoices
- Price: 2.5% over BOE base rate
- Security: Combined strategies
Arranging invoice financing provided the business with the much-needed cashflow injection required to meet CapEx involved with implementing its new business strategy to meet its immediate financial obligations, stabilise operations, and pursue expansion opportunities. Simultaneously supporting growth and improving working capital, this was a great solution for the business.
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