Reparo Finance Completed Deal: £350k for a Manufacturing Business to Support Cash Flow

Deal Type: Working capital

Loan Amount: £350k

Loan Type: Reparo

Security: Commercial Property

Region: Herts

Reparo was approached by a broker to help provide £100k of financing to manage some cash flow challenges at a manufacturing business. After visiting the business, Reparo agreed a significantly larger loan of £350k (more on that later).

The company engineers a specialist product for use in the construction industry, is run by highly experienced directors, and has been operating successfully since 2011.

The product it engineers is large and expensive, and the type of contracts it works on can lead to numerous cash flow challenges:

  • Large investment needs to be made on materials at the start of the project, normally weeks or months before any payments are received.
  • Because the company works on such large products, it is hard to ensure cash flow is consistent – creating lumpy income.
  • The sales cycle is generally long and unpredictable for projects, meaning it’s always hard to commit to investment and hard to resource the business effectively.
  • Profit is generally realised at the end of a project, again putting significant pressure on cash flow.

The company already had some bank lending in place, but was finding it difficult to increase the provision for several reasons:

  • Recent company performance hadn’t been strong.
  • The bank already had a significant lending agreed with the business so was unlikely to increase it – certainly not without detailed due diligence.

Reparo always takes a closer look at each proposition as experience has shown that every business is unique, and it is often possible to provide a lending solution.

In this case, the team went to visit the company and were happy to extend the loan for a few reasons:

  • As mentioned, the business was well established with a competent and experienced leadership team.
  • Although recent performance had been less impressive than in past years, there were clear reasons for this, mostly linked to the unpredictable nature of the construction industry.
  • The directors had given significiant personal guarantees to the business, demonstrating a strong commitment to its success.
  • The company delivered excellent products and is highly respected in the sector.

Overall, the Reparo team felt the business was fundamentally strong and just needed some working capital to manage a challenging short term situation.

Reparo agreed to lend £350k so the company could consolidate its lending, this enabled Reparo to be the main chargeholder on the commercial property and subsequently provide more flexible terms.

The repayment plan was weighted payments towards the second six months of the loan period, providing further assistance to the business in navigating its cash flow challenges.

Reparo relationship manager Jason Cossey said: “The business is operating in a difficult space, the fundamental product it offers is good. We saw this cash flow challenge as a consequence of the size of contracts and industry it operates within. It was great to help a strong engineering business deal with its challenges.”

Reparo managing director Andrew Ward commented: “When I met the company directors it was clear they had extensive knowledge in the sector and ran a strong company. In its sector, income can be unpredictable, and this needs careful financial planning and appropriate lending – we were very happy to provide the lending.” To discuss a loan of between £10,000 and £1m, please get in touch with one of the team on either sales@reparofinance.co.uk or 0161 451 5710. You can find out more about us on our website:  www.reparofinance.co.uk.