Often an event driven capital raising works best when the funder works as part of a team providing the client a holistic solution to both the immediate need for funding and the causes of the immediate need.
Hermes Capital provides Asset Based Loans to businesses in transition. Transitioning scenarios include growth, acquisition, restructure, and – as demonstrated in this month’s case study below – turnaround!
At Hermes, we understand that it is the transitional scenario/event that brings about the need for cash flow funding. Tax arrears and problems with the bank are only symptoms of the transitional scenario – an important distinction as this month’s case study highlights.
One of the “secret ingredients” Hermes brings to the table when structuring finance is the extensive network of professionals we can introduce to the client to help solve the root cause of their issues. We can provide the cash to address the symptoms – the causes still need understanding and remediation.
A regional transport business encountered a shortage of cashflow after they discovered that their accountant had not been correctly accounting to the ATO.
The problem had been hidden from the directors for a number of years. When it was finally uncovered the damage financially was substantial.
This is not an uncommon scenario. The business owners have been working hard for many years. They want to have more time to themselves and so entrust their accountant with the figures and ATO commitments. Due to their absent watchful eye, liabilities were incorrectly calculated and the problem discovered too late.
The business sought the support of their bank, but the bank, once apprised of the extent of the ATO arrears, instead wanted their facilities repaid in full.
The business needed funding so that it could trade out of the problem and time to fix the underlying causes.
Asset Based Lending Solution
Hermes Capital refinanced the bank by providing a term loan secured by real property and trucks previously held by the bank.
Hermes also provided a debtor finance facility to provide ongoing working capital needed for the business to move forward.
Hermes specialises in “Asset Based Lending”- 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).
In addition to an Asset Based Lending solution Hermes was able to bring to the table two key introductions (with of course the finance brokers consent): an ATO negotiation specialist, and a new accountant.
The gap in the market for commerical finance
In transitional scenarios, funding is usually only one piece of the puzzle.
Hermes works closely with other professionals to help the client find ways of moving beyond the transitional situation to a more prosperous future.
The ATO specialist negotiated a workable plan with the ATO and the remission of ATO penalties. Hermes funded the first instalment of the plan (a lump sum) so that it got off to a good start.
The accounting firm started reviewing the clients’ books and systems to bring them up to date and to give the client a clear window on their finances.
The business has stabilised and is on the way back – its workforce intact and the financial future of its owners secured.