Vital funding helps client overcome “challenging time”
Post Covid, our client, a manufacturer of quality stone cladding and framing systems for commercial buildings, felt the impact of the challenges so prevalent across the majority of business sectors, in particular within construction related industries, encompassing VAT and rent arrears. External market conditions had an impact on what had previously been a profitable business, meaning it became loss making for a period.
As with much of the construction sector, the business’s order-to-invoice process is not straightforward, with sales sometimes forming part of a larger order or contract. This can result in staged payments, as well as potentially other aspects such as tooling, call-offs or guarantees. With successful overseas sales, there was the added complication of funding overseas trade to consider.
Further, naturally, the business found that as a result of challenging trading times, a portion of their customer base had reduced credit ratings and the business had overdue debts owed from customers.
During 2022, when faced with the unilateral increase in the cost of materials, the manufacturer successfully navigated a mutually workable solution with their customers, resulting in them holding stock on their behalf to be called off and fabricated as required, and billed thereafter in phases, invoicing for the fabrication on delivery.
Significant challenges
Hilton-Baird’s team was introduced to the manufacturing business by a firm of Insolvency Practitioners who were reviewing the business’s options. Prior to Hilton-Baird’s involvement, the manufacturer had faced significant challenges in securing a funding facility due to the sector the business operates in, whereby credit limits are impacted due to concerns about viability, resulting from a lack of understanding of the business, the security available and background.
Additionally, because our client is mostly investor owned, there was a lack of Personal Guarantees available, which meant the funders they had approached were not the right match for their business.
Determined in approach, our team entered into dialogue with a wide array of funders on behalf of the manufacturer, all of whom initially declined. Our team was certain that the business was fundable, so focused on finding a way to get a solution for our client, setting out how a facility could be structured and possible mitigants for concerns, which subsequently led to four funders providing offers which were presented to our client.
Two funders were shortlisted based upon the overall facility structure and operating conditions. To support and fast-track the process, we offered the option of our client engaging with our sister company directly to have an independent business survey conducted, which could be shared amongst the funders we’d introduced, saving the client valuable time and associated costs.
This approach also helped to save our client precious time given the ongoing negotiations with HMRC, negating the need to facilitate multiple due diligence processes as the survey was concluded in one visit, each funder benefiting from the PI cover held by our sister company, who are a trusted name and utilised by the funders too.
Headroom
Subsequently, our client chose the successful funder based initially on the structure of their offer, which balanced the required level of funding with the restraints on additional security available from the Directors and the need for a confidential facility. In the end, there were two funders that met the requirements, with the secondary consideration being the quality of the individuals and the inclusion of their operations team at the initial meeting.
The Confidential Invoice Discounting facility secured has headroom to increase funding based upon the performance of the manufacturer, providing flexibility to support ongoing and future growth.
Hilton-Baird’s expertise – and knowledge of underwriting and how to structure a deal to enable a funder to support a business without compromising their risk – meant the manufacturing business went from having no options on the table to having four proposals to consider.
The new facility will allow the business to secure a Time To Pay arrangement with HMRC, ensuring the business can continue trading.
“Seamless and painless process”
Finance Director at the manufacturer comments: “We are very appreciative of the support Hilton-Baird’s team provided us. Appreciating how busy we were at the time of being introduced to them by our advisors, they did a great deal of work behind the scenes and ensured a seamless and painless process.
“From an initial simple request for the relevant information, they subsequently undertook the legwork in order to provide us with four indicative offers and structures against the backdrop of what was a challenging time for us as a management team. They were supportive and collaborative and talked us through each offer, providing a comparison document and enabling us to consider our options.
“We had a minimum requirement and specific needs for funding which had previously seemed unattainable. They demonstrated expertise and tenacity, keeping us supported and informed throughout the process, so we felt confident that we were in safe hands in achieving the right support for our business. We wouldn’t have been able to secure the required funding without their support, guidance and in-depth knowledge of the market.”
He concludes: “We look forward to being able to focus on pushing our business forward now we have this new funding in place.”
