Hermes Capital fills a gap in the market that exists for timely commercial funding in “event driven” situations.
Event driven funding “triggers” usually fit into one of two categories – “growth” or “trouble”. Regardless of which category fits, the requirement is usually time sensitive (if not urgent); not easily supported by historical financial data, and; usually the funding levels required cannot be achieved by leveraging debtors, plant and equipment or property in isolation.
As a non-bank independent managed fund, Hermes is not bound by traditional credit constraints and is able to offer a unique approach by giving value to all three of these asset types.
The result is the rapid delivery of the right levels of funding – as this month’s case study demonstrates.
How does a food manufacturing business raise capital to grow its business if it has been historically trading below “break-even” and if the directors lack sufficient equity in their home?
A food manufacturing business with patchy financial statements won a supply contract with a national retailer that would potentially double revenues. Newly developed pre-prepared “fresh” meal products would be added its existing range of desserts. The manufacturing process, whilst similar, required investment in new equipment and working capital.
The directors of the business owned property, but it was reasonably geared. The equipment required may have been financeable had the business had an established history of trading profitably, but this was not the case. The debtors ledger was sufficient to support the working capital funding requirement, but certainly not the additional funding needed to purchase the additional manufacturing equipment needed to manufacture the new product line and to fulfill the new contract.
Asset Based Lending Solution
Hermes was able to provide a revolving working capital facility in the form of debtor finance – this capability in itself was not unique in the circumstances. However Hermes was also able to provide an additional term debt facility supported by the existing plant and equipment and a second mortgage over the directors home sufficient to meet the asset purchase requirement.
The gap in the market for commerical finance
No other lender was able to fund against all three assets types, and finding three lenders – one for each type of asset would not have been possible under the circumstance.
The business has been able to expand its capabilities and fulfill its new contract. The growth that has resulted has dragged revenues well above “break-even” and eventually the business will be able to raise capital from traditional sources.
In the mean time the business and its owners will prosper, with the referring broker receiving kudos from the client for finding Hermes, as well as earning upfront and trailing commissions from Hermes in the process.