Hermes Capital specialises in providing asset-based funding to SMEs and mid-market companies in special situations. Special situations are those where the normal rules don’t apply.
Hermes is an investment fund – not a bank, and so Hermes has the flexibity to structure the right deal, for the right amount, and at the right time to give your clients the decisive fire power they need to achieve their goals.
Hermes provides funding from $500,000 to $10M for problem-solving working capital – comprising debtor finance and, where appropriate, adjunct term loan facilities secured by equipment and/or property.
This month’s case study highlights a special situations case where a transport company was depleted of its cash resources after the directors invested in a pub.
A “Special” Transitional Case
The client operated a transport & haulage business owning a fleet of trucks and trailers for day-to-day business operations.
Regionally based, the client has customers that included quarries producing building materials, as well as several customers supplying agricultural supplies to the local farming community.
However, the business was at a crossroads on two counts. The financials provided at the time of investment by the pub vendor were misleading – deeming the side venture a distraction and a relatively costly one at that. At the same time, the owner of the business was looking to execute on a succession plan with his son to take over the transport business.
The cash burn on the pub venture led to ATO arrears in the transport business, ultimately making it impossible to fund the business through traditional means.
The client’s bank, spooked by the emerging ATO arrears, wanted its facilities repaid. In addition, the ATO needed to be addressed and the business required fresh working capital to be able to trade out of this adverse predicament.
The gap in the market for commercial finance
The overall funding requirement was determined to be $1.25M – inclusive of a bank payout, an ATO down payment (on a payment plan) and working capital for the business.
This amount was well out of reach for other FinTech’s, while the credit profile precluded traditional financiers who would otherwise be comfortable with the required level of funding.
The nature of the funding (a combination of debtor finance and a term-loan) is a Hermes specialty. The available security was assessed and deemed adequate to support the requisite level of funding.
Asset-Based Lending Solution
Hermes structured a $1.25M Capital Maximiser Facility, including a term loan secured by the unencumbered vehicles in the truck fleet of $500,000 and a debtor finance facility of $750,000.
The fleet included aged as well as newer items that were unencumbered and viewed as good security. The debtors were well maintained and provided good security for the working capital funding needed moving forward.
The Hermes facility settled, and the business is now winning new clients at good margins and meeting its ATO payment plan.
The father remains in the business for now, with the son slowly taking over the day-to-day operations as planned, with a lesson in the distractions of side ventures learned.