A consumer products manufacturer discovered a new distribution channel that provided an opportunity for very rapid growth. To finance the long-term assets— such as a new plant and equipment—it needed to support the market it had developed, the company was using current operating cash. As a result of this capital investment and the need to grow inventory to fuel a growth rate of over 50 percent, the company soon found itself running out of cash and unable to pay vendors.
Since the company was profitable, several banks were interested in working with it to develop a financing plan and provide the funding capability to achieve its goals. But due to some challenges, including an earlier failed ERP implementation, it was unable to produce the financial statements and forecasts that would support the banks moving forward. An outside advisor suggested the company get additional help in working with the banks.
The company brought in a E78 team member as interim CFO. He led the preparation of a detailed cash requirements forecast to define the parameters for a more stable financing structure for capital-intensive manufacturing. Next, he worked with two banks that were competing for the business, developing the financial reports and inventory tracking tools the banks needed to evaluate this credit.
The E78 team member negotiated terms with the banks and coordinated the refinancing. The company closed one operating line of credit and reached agreement on four term loans of various lengths and a new operating line that more closely matched up with the financing requirements of the company. In addition, the E78 team member helped the company through an audit and assisted in adding and/or replacing people to fill several key positions.
The company was able to:
- Obtain $17 million of financing in a combination of term and working capital that replaced an existing $3 million working capital line
- Free up previously constrained working capital needed to support inventory growth and marketing efforts
- Add an additional $6 million in financing later as it continued to grow
- Improve its ongoing capital asset and financing structure requirements planning so it can successfully finance new assets going forward