The Scenario
A well-established and second-generation family enterprise, this plastic injection moulding business has been trading for over 50 years. Business was extremely successful for several decades, however, they encountered trading difficulties following the GFC and never really recovered. They recruited an experienced management accountant in late 2016 to provide turnaround consultancy services for the business.
Over the past 18 months, this consultant has been successful in steadily restructuring the whole operation. The consultant identified that the existing bank’s working capital solution was too inflexible in structure and size, because it was secured with real estate security and would be inadequate leading into the future.
The Solution
Octet was approached to discuss the need for a flexible and well-structured invoice discounting facility. With the current receivables ledger at $800k, Octet implemented a $1m Notified Invoice Discounting facility, providing a revolving line of credit against the business’ unpaid invoices.
This ideal solution enabled three key outcomes:
- No requirement for property security
- Facility allowing them to draw on available funds only when needed
- Access to a flexible funding facility that would grow along with their business into the future
With the facility now in place, the business has a flexible and stable working capital base that is aligned to their sales. This has provided them with security and comfort knowing that in their peak trading periods they will always have sufficient funding to meet their inventory and wage requirements. In addition, they can continue to fund the planned expansion of their business.
