Increase Working Capital at Lower Interest Rates

70 Year old Metal Component Manufacturing Company needed more Working Capital for Growth

The Company: The 70 year old privately owned metal manufacturing company based in the Mid-West required new capital for growth and expand with new equipment to increase productivity.

The company had a secured ABL at high cost of capital since 2021. The company had a limited $4.5mm working capital at 11.5% APR and no credit for equipment financing. The senior lender would not increase credit limits due to low margins and high customer concentration. The company had to settle A/R daily before A/P got approvals for issuance of payments to suppliers through a required lock-box.

  • Revs FY’21- $31,000,000
  • Assets- $12,300,000 (not including $13mm real estate)
  • Liabilities- $14,800,000
  • A/R- $4.1mm DSO 38 days
  • A/P – $2.9mm DPO 27 days

The Situation: The Company had low margins and high machine utilization across several processes. They needed new capital to buy new machinery and pay suppliers purchase and stock raw materials in bulk vs. discreet orders. The current lender’s credit lines would not extend for CapEx and help reduce raw material costs with inventory financing. Customers would not award new business due to tight financial conditions at the Company. 

Investment thesis: “Tight on Working Capital and CapEx”
Marabek developed a cash flow plan to show new lenders of the company’s ability to recap its debt and buy new machinery at lower interest rates. An improved business plan also showed customers the Company’s ability to take on more work at competitive prices. The refinancing with a growing bank offered extra capital to buy new equipment at ultra-low rates with several tax incentives to help the Company finance a lower cost of ownership. 

The Company closed funding with Marabek’s support in less than 40 days after term sheets were signed.  The new ABL loan for $11,000,000 included $4,000,000 for new equipment purchases at 5% APR for a 5 year term. Additionally, the Company received a two month interest waiver. The new Bank’s additional WC helped reduce inventory costs by 15% for new orders and boosted gross margins from 23% to 31%. 

Marabek found an aggressive growing bank with $12B in assets to help the Company to provide access to new capital in a short window. With over 145 national banks, lenders, specialty investors and private capital within our network, we can facilitate complex capital needs with expediency.

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