Stock Financing, Revolving Credit Facility Secured For A Client In Tricky Circumstances

• Client: Business owner
• Requirement: Debt facility for stock purchase
• Challenges: Loss-making business, weak PG position and liquidation in the background
• Facility: £300,000 revolving credit facility for supplier-side payments

Enness was approached by a business owner operating within the online retail sector who was looking for a flexible debt solution to support the business through a period of challenging trading conditions. Supply chain disruption had reduced profit margins, while recent expansion had increased fixed costs across areas including warehousing, marketing and staffing.

With margins under pressure, access to sufficient stock had become one of the biggest constraints on the business. Limited cash reserves following the expansion meant that the company could not always purchase stock when required. Revenue from previous transactions could also take several days to reach the business’ bank account, resulting in high-value, high-margin products being listed as out of stock and creating missed sales opportunities.

The business was also missing opportunities to purchase larger quantities of stock from suppliers at discounted rates. These offers were often time-sensitive and exclusive, meaning the inability to deploy capital quickly could have a direct impact on the company’s ability to improve margins. The overall financing picture was further complicated by an ongoing liquidation involving an unrelated business, a relatively weak personal guarantee position and significant existing unsecured debt that was placing further pressure on cash flow.

The client initially approached Enness seeking a traditional business loan with fixed repayments over several years. After reviewing the business and understanding how its cash flow and stock purchasing cycle worked, we determined that a revolving facility would provide a more appropriate solution.

Enness secured a £300,000 revolving credit facility for supplier-side payments. The facility gave the business access to additional liquidity when required, allowing it to purchase stock quickly, take advantage of supplier opportunities and reduce the risk of inventory shortages. Importantly, interest was only payable on the funds actually utilised, allowing the business to manage the facility according to its changing requirements.

We also refinanced the existing debt with the same lender by arranging an interest-only facility with the option of bullet payments at agreed intervals. This provided additional flexibility around the company’s repayment profile and helped reduce the immediate pressure on its cash flow.

This case demonstrates how working capital finance can be structured around the way a business actually operates rather than relying on a standard term-loan structure. For businesses with complex circumstances, a revolving facility can provide greater flexibility where access to liquidity is closely linked to stock purchasing, supplier payments and fluctuating cash flow.

Enness works with a broad network of relationship-driven lenders and can assess the wider circumstances behind a business’ financial position when sourcing working capital finance. To discuss your requirements, speak to a mortgage specialist.

Risk Warning:
Business finance carries risks. If the business is unable to meet the terms of the facility, this may result in enforcement action where security or guarantees have been provided. Revolving facilities can also result in additional interest costs if balances remain outstanding for extended periods.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal or tax advice. Finance is subject to status, underwriting and lender criteria. Terms and availability will vary depending on individual circumstances. Enness does not provide legal, tax or investment advice, and lender introductions are unregulated.