Trade Finance - 3 Case Studies
CASE STUDY 1
Industry: Energy Efficiency
Facility Size: $500,000
GrowBiz Solution: Import Trade Finance
The problem
This client provides energy solutions to major retailers and manufacturers throughout Australia with an annual turnover of $8 million. The business imports the hardware required from China with a 60-day order lead time to manufacture and can only invoice customers upon delivery. The business needed cash flow to get the stock to Australia with trade finance being the best solution.
Why Grow?
The client previously used Grow’s services and was confident he would receive the same superior service and funding needed to assist his business.
The benefits of using Grow
Over time Grow worked with the client to improve the credit terms they received from their suppliers. Grow’s line of credit was used to assist the client by enabling the business to forego the 30% deposit required to commence production and have the cost of the stock paid in full only when it was shipped and the required documentation presented. The client’s cash flow is now much improved and he can focus on maximizing the national roll out of his business.
CASE STUDY 2
Industry: Textiles
Facility Size: $250,000
GrowBiz Solution: Import Trade Finance
The problem
This business is an importer and distributer of industrial grade textile fabric and carpet products to Australia and New Zealand. The owner had recently purchased the $2.5 million turnover business and needed a finance facility to provide cash flow for stock, as his finance facilities with his bank were maxed out from the purchase.
Why Grow?
The business chose Grow Trade Finance due to its reputation in the market and its flexible approach to lending. The client’s direct access to Grow’s decision makers meant their facility was set up in days allowing them to draw down for needed shipments.
The benefits of using Grow
By using Grow Trade Finance the business had consistent cash flow and was able to ensure a smooth transition for customers as ownership changed hands without impeding on his bank covenants.
CASE STUDY 3
Industry: Audio Visual
Facility Size: $100,000
GrowBiz solution: Import Trade Finance
The problem
As a start-up audio equipment importer, this business had just secured a contract with a national Australian retailer. However, the owner did not have enough cash flow to source the stock from his overseas supplier. The owner had 5 years’ experience within the industry but little support from financiers without the need for property security. After considering multiple finance offers the business chose a trade finance facility with Grow.
Why Grow?
On recommendation from its finance broker, the audio importer chose Grow Trade Finance as it provided them with the most competitive rates and service level offering
The benefits of using Grow
By using Grow Trade Finance the business was able to pay the supplier to get the stock to Australia and offer 30-day terms to its new customer. With a facility in place and funds available when needed the business was able to secure new contracts with retailers who also have national distribution. The facility has allowed the business to achieve sales in excess of $500,000 within the first 9 months of trading.
Equipment Finance - 5 Case Studies
CASE STUDY 1
Crane Company
Directors asset backed
Client wanted to perform Sale & Hire Back for $400,000. We split the deal with another lender
The other lender did $200,000 for ATO debt
We lent $198,000 to payout some suppliers and some other company debts with security over a couple of cranes at 60% LVR on the assets
CASE STUDY 2
Earthmoving company
Director asset backed
Sale & Hire Back to raise $300,000 to buy earthmoving equipment from UK
Once they land here, the asset security will be swapped over
Very strong cash position and turnover in the borrowing entity
CASE STUDY 3
Sole trader – asset backed
The clients bank accounts were not managed well and presented poorly
Needed a $30,000 4WD to allow access to remote areas for increased work and income contracting to mines
Client has been bounced around which resulted in a poor credit score
Declined from half a dozen lenders due to mismanaged bank accounts, personal and business all in one account. Although the deal presented badly, the credit team performed a true analysis which provided Grow comfort with serviceability and the client was approved as a rent to buy product
CASE STUDY 4
Prime Transport Company
Director asset backed
Strong client, large equity position in company and strong cash position
They had reached their limit with other lenders until Financials for FY19 were done
We provided finance up to $150,000 for New & Used Trailers, with 10% deposit
Chattel Mortgage
CASE STUDY 5
Company less than 2yrs old
Director not asset back
Expanding company, adding a new truck attached with a contract
Only using privacy, bank statements and ID we were able to asses and approve the deal.
$45,000 approved on a rent to buy product
Debtor Finance - 4 Case Studies
CASE STUDY 1 – Transport
The Client
- Transport & General freight
- Debtors Ledger $1million
Fixed Assets $1.4million
The Offer
- Invoice Discounting
- Advance Rate 85%
- Facility Limit $1.2 million
- Offer subject to strict terms
The Situation
- Creditors Trade $1.2million
- ATO $400,000,
- Related Party Creditors $1million
- Invoice Finance Co – $800,000
- Finance Company – $1.5million,
- Bank Overdraft – $200,000 mortgage backed
The Solution
- Advised to enter into VA
- license agreement for newco to trade.
- creditors agreed DOCA
- AIF paid out factoring with old co
- New facility with newco for VA license period and DOCA
CASE STUDY 2 – Partner Buy Out
The Client
- Mining and Construction Services
- Annual Turnover $13.2 million
- Debtors Ledger $1.2 million
- 15 years of profitable trading history
- Positive asset position
The Offer
- Invoice Discounting
- Advance Rate 85%
- Facility Limit $1.2 million
The Situation
- Parents wanted to retire & children take over the business.
- Overdraft $250,000
- Charge over company
- Parents family home security for over draft
The Solution
- Invoice Discounting facility replaced
the overdraft - Security over parents house released.
- Parents paid lump sum of $500,000 and on going Salary of $75,000 p.a. for 5 years.
CASE STUDY 3 – Transport
TRANSPORT BUSINESS – GENERAL FREIGHT
- Debtors $1million – factored, Fixed Assets $1.4million, Goodwill $0
- Creditors Trade $1.2million , ATO $400,000, Related Party Creditors $1million, Invoice Finance Factoring Company -$800,000
- Finance Company- $1.5million, Bank Overdraft – $200,000 mortgage backed
ISSUE is the client could not repay creditors and defaulted on the ATO arrangement. The financiers were nervous and bank would not fund
SOLUTION – client got advice to enter into a Voluntary Administration
- Settled overdraft with new non-bank lender
- VA agreed to license agreement for newco to trade, creditors agreed DOCA
- Australian Invoice Finance paid out factoring with oldco and a legally set up new facility with newco for VA license period and DOCA
OUTCOME Client trading successfully in VA period, paid DOCA in full, trading well
CASE STUDY 4 – Long Haul Transport
Family owned transport business
- Debtors $500,000 , Fixed Assets $50,000 , Goodwill $10,000
- Creditors Trade $200,000, Vehicle Finance Company- $100,000, ATO Debt $50,000
ISSUE – trading losses, client had slow paying debtors, needed cashflow to repay creditor’s, defaulted on the ATO arrangement. Needed to purchase a new truck to keep up with client demand.
Bank wouldn’t lend any money due to ATO. EF Company would only lend $150,000 of $250,000 Purchase price.
SOLUTION – Broker approached AIF to see if client could use Invoice Finance Facility to raise the extra capital.
- AIF advanced 85% of current ledger – $425,000
- ATO Debt $50,000 Cleared
- Client used $88,000 to pay deposit on truck.
- $280,000 Cash remaining to pay creditors.
OUTCOME – Client was able to clear ATO debt and Purchase new truck.
Client is able to meet customer demand and the business is growing supported by invoice finance facility