Hermes Capital provides Asset Based Loans to businesses in transition.
“Asset Based Lending” is commercial financing to a business with up to two components: a revolving working capital facility supported by accounts receivable, and; a term loan facility that potentially doubles the availability of funds, and is secured by plant and equipment, and or real property (usually via a first or second mortgage).
This approach gives Hermes unique finance structuring capabilities and can be tailored for businesses transitioning through growth, acquisition, turnaround or restructure.
This case study demonstrates how Hermes fills the gap left by the banks and other institutions in the SME market for commercial finance.
A manufacturing business turning over $6 million p.a. needed to undertake a formal restructure after the ATO had commenced proceedings.
A substantial ATO debt had accrued as the business had ventured into project work that had become loss making.
The company’s core manufacturing business remained profitable, and a formal restructure would allow the business to divest itself of the project (loss making) side of the business and the debilitating debts that had accrued as a result.
Asset Based Lending Solution
An overall funding requirement of $1 million included a need for $600,000 in working capital as well as $400,000 to payout the bank in order to safeguard assets the bank held as security and to prevent the bank moving on personal property held by the directors.
The assets included accounts receivable of approximately $750,000, as well as motor vehicles (trucks and utilities) and manufacturing plant.
Having determined the ongoing viability of the business, Hermes provided an Asset Based solution via its Capital Maximiser Facility that included a $600,000 debtor finance facility and a $400,000 term loan.
The gap in the market for commerical finance
No other lender in the market place (and certainly no bank) would lend to the business given its recent history and insolvency. Hermes was able to assess forecasts and mitigate risk by valuing various classes of security in order to provide a workable solution.
The business was restructured and the bank kept from interfering in that process (and potentially seizing the directors home).
The business is now focused on its core operations – where it had been historically profitable – and is on the way to a sustained recovery.