The Scenario
This labour hire business has been operating in Western Australia for over 10 years.
Providing skilled labour to mining, civil, and trade sectors, it’s been self-funded since its inception in 2008, with a healthy balance sheet and around $10m of annual revenue.
When the business initially approached Octet, it was structured under a 50/50 shareholder split, with one half being a silent partnership. Funding was sought to help restructure the business, as well as cater for ongoing business costs.
To assess the company’s situation and recommend the best solution, Octet reviewed the viability and concentration of the company’s current debtors, discovering that the business had a major debtor with a 50% concentration of all receivables. The same debtor also had a strong, positive payment history with the company.
The Solution
Octet recommended a disclosed Debtor Finance facility, allowing for regular checks and payment tracking with full disclosure to the debtors.
The Debtor Finance facility helped the initial change of ownership in the business, with the Managing Director and shareholder using these funds to buy out the silent partner’s share (covering both their loans and equity).
With 2020 performance tracking well, and expectations that the business will quickly return to profitability, the company can also use this facility to inject new cash into the business, helping them build on their ongoing success.
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Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.
