Client was growing as the #1 retailer in many national grocery chains, with an opportunity to get into Costo; a once in a lifetime opportunity. They could not finance a new purchase order (“PO”) from Costco because their financing partner was late to fund them. As CPG operators know – these opportunities are the holy grail of CPG and when they arrive, it’s do or die. If a CPG company fails to execute on a first time order, from a very large retailer like Costco, that could be the end last chance they get. Generally speaking, the client was able to finance growth with their existing financing partner. However, the POs had outgrown them, and that’s almost always the case for growing CPG. As growth occurred, there became less room for error. Outside of their control, the senior partner was late paying them. So they had to resort to sales based financing, in a junior indebtedness position.
That’s where Capital Desk came into play.
- Secured $1.1M in 31 hours, unsecured behind senior creditor
- Sales based financing, based on cash flow history and sales
- Non-dilutive capital where returns are asymmetrical to fees (Costco as a continuing client)
Because Senior Creditor did not allow for a signed intercreditor, we settled on not filing a UCC-9 lien on the assets of the business. This provided the company with a risk-free option to the managers of the business who collectively were still a minority of the company.
- Client turned $1.1M in Costco POs into $2.5M in sales
- Client used that those new Costco A/R to finance more Costco POs
- Client was completely paid off on Sales Based Financing deal in 9 months, preserving equity
- Client continues to rinse and repeat with Costco Growth
