Hermes Capital provides solutions to the working capital constraints that businesses face when they are trying to grow, re-structure, re-align or refinance.
The capital Hermes provides comes with the right structure, in the right quantity and at the right time to give our clients the decisive fire power they need to achieve their goals.
More than this however, Hermes is able to bring not only extensive financial experience, but also our professional networks to navigate a problem. In doing so, not only is the required funding more likely to be provided but the challenges a business faces can be addressed more substantially than otherwise achievable with capital alone.
This month’s case study demonstrates how Hermes was able to leverage an underutilised balance sheet to assist a business under stress to keep their major suppliers on favourable terms, and ongoing growth supported.
A “Special” Transitional Case
Payments to key suppliers are crucial to the viability of any business, especially when suppliers and wholesalers account for the majority of a company’s turnover. But how does a business remain on good terms with a supplier when unable to keep up with their obligations?
Hermes was referred a steel wholesale and fabrication client that had been in operation for over 10 years. The referrer happened to be the company’s largest supplier.
The accounting practices within the business were undergoing a transformation, with changes to both their software packages and inventory management systems.
As a result, data accuracy became lacking and the company’s financier was unwilling to accept these changes. The decrease in funding that followed lead to an issue with short-term working capital requirements – where the first to suffer were the suppliers.
The gap in the market for commercial finance
The supplier was grateful for the outcome, because at the end of the day, they would prefer a prosperous client than deal with the time and cost of litigation.
Day-to-day management of supplier payments and collecting customer invoices can become stressful for many SME’s. We understand this and work within tight time constraints to minimise the pressure placed on businesses.
Here, a Hermes debtor finance facility was utilised to benefit a range of stakeholders by providing short term liquidity to the applicant. All parties had their own self-interest, but mutually benefitted from the facility overall.
Asset-Based Lending Solution
Hermes Capital was able to provide a revolving debtor finance facility to assist with the clients’ immediate funding requirements.
The supplier, whilst needing to be paid, recognised the client had serious growth prospects and was strategically important.
In any case, cash flow is pivotal to the running of a successful business, especially when a company is so heavily reliant on the supplier of raw materials.
The applicant was provided with a funding limit of $2M against current outstanding invoices. This allowed them to pay to bring the key supplier within terms – the supplier having agreed that if this were the case, they would continue to provide the support needed for growth.
The business has continued to keep up with its current supplier obligations along with an agreement to finalise payments for the existing debt. With the current back-end systems now fully implemented, cash flow projections show that the client will be profitable and well-funded by early 2020.