Alternative Lending Case Study: How Speck Secured New Financing to Eliminate Working Capital Constraints and Fuel Growth
I recently blogged about a $4.5 million senior secured credit facility that US Capital Partners secured for Speculative Product Design, Inc. (“Speck”). Their situation was interesting because even though they were performing well along their projections, they weren’t able to secure sufficient growth capital from their bank– even though they were growing.
They were stuck in a credit facility that was put in place when their performance was not as strong. It was appropriate at the time, but after a couple years, the pricing was not appropriate for current performance. Additionally, Speck’s lender was deleveraging the inventory financing available to the company and was unable to provide additional funds.
It’s a real sign of the times when banks stop or restrict advances against inventory due to internal changes or re-organization.
So what do you do if you’re doing great, but your bank isn’t?
When a bank makes their problems your problem, your business can fall victim to high pricing and/or reduced growth capital due to circumstances at the bank that have nothing to do with your own company’s performance.
As a leading designer and manufacturer of electronic accessories, Speck wanted to capitalize on upcoming commercial growth opportunities, but needed financing that was affordable and intelligently structured. We recognized that. And when they engaged USCP we were able to refinance its line of credit and increase its borrowing availability to support the company’s continued domestic and international growth.
Serving as lead arranger, US Capital Partners arranged a $4.5 million senior secured credit facility for Speck. The credit facility served to refinance Speck’s previous line of credit, and included an inventory revolver and an AR line of credit for both domestic and international assets. Working with its many affiliates, we successfully structured and arranged an optimal financing arrangement for Speck.
This solved the funding problems created by the bank, who had reduced its advances to zero. We were able to restored it to previous levels and above. Additionally, Speck ended up with more capital at a lower cost. Since we’re an alternative small business lender, we can refinance with the same or more capital than what businesses had before - even if your company is not meeting the bank’s lending criteria due to their own internal changes or your own modest performance fluctuations. The cost may be more (due to risk associated) but you can recover the funding base you had before at the bank till your company is recovered and bank on track – then you can sweep back into a bank relationship.
How to secure alternative financing to eliminate working capital constraints and fuel growth
While alternative financing may provide the solutions you seek, your marquee bank is most likely not going to offer you alternative lines of credit. They won’t even direct you to an alternative division of the bank that may better serve your evolving needs. Banks often lack free flowing communications between divisions and tend to be more interested in managing portfolios and profitability. Banks are more likely to change credit lines to meet the bank’s needs, not the client’s needs.
If your performance and needs are small enough to fit into the bank’s narrow criteria, bank borrowing can be a great option for funding. But if you don’t fit into the bank’s narrow strike zone, that’s where alternative lending can add value. Alternative lenders like USCP can help you secure a larger credit facility over a wider array of assets and also provide additional strips of capital for owner liquidity based on the strength of the company and value of assets. We can provide you with better debt structure, lower cost of capital, and higher advance rate on A/R and inventory.
Alternative financing can also help you in transitional situations and can provide full facility until you can move back into a bank relationship. At USCP, we are advisors, co-lenders and lead arrangers who always look out for the best interest of clients. We have wide array of products to offer – so we are able to keep their best interests in mind. We pride ourselves at looking at needs of each client very closely so we can offer the most comprehensive refinancing package at the best price.
Visit our web site to read more about US Capital Partners' recent transactions.
Since 1998, US Capital Partners has been providing prompt, innovative, and reliable financing solutions including lending, corporate financing, and debt re-structuring to businesses across the United States and abroad. We will give your business the attention it deserves and find the most suitable product for you. We offer true one-stop financing and will work in partnership with you throughout the lending process. If you would like to know more about how your business can secure the funding it needs, visit http://www.uscapitalpartners.net/ or call (415) 882-7160.