A labeling company with annual revenues of roughly $12MM has experienced rapid growth since becoming an INSBANK client roughly 8 years ago, seeing annual revenues increase by 300% during that time period. As a multi-generational company, it had invested heavily in plant and equipment for its operations at a main campus in Nashville, with several satellite warehouses for housing inventory. The client first became a treasury management client, utilizing various treasury products, including remote deposit capture and ACH origination for payroll. In reviewing the client’s balance sheet, INSBANK’S relationship officer noted there were loans at multiple banks and leasing companies originated over the years for heavy equipment purchases prior to becoming an INSBANK client. INSBANK approached the customer about simplifying its debt structure and consolidating all of its financing at one financial institution – INSBANK. Having the simplicity of making one monthly payment and utilizing an accommodative amortization schedule that matched the life of its equipment assets, the company’s monthly cash flow improved by 25%.
Having the simplicity of making one monthly payment and utilizing an accommodative amortization schedule that matched the life of its equipment assets, the company’s monthly cash flow improved by 25%.
In conjunction with the debt consolidation, INSBANK offered to provide a line of credit secured by the company’s accounts receivable, inventory, and equipment to assist with managing working capital needs while allowing the company to take advantage of supplier discounts.
Three years later, the company has outgrown its current headquarters where it leases space and has decided the time is right to purchase their own building where they can bring all of their operations and warehousing in-house. Purchasing their own building eliminates the risk of lease expirations, rent increases, and landlord issues while also building a secondary long term asset for the company’s owners. INSBANK is assisting by providing the financing needed to purchase the building. To limit a drain on liquid reserves, in lieu of a traditional down payment, INSBANK is leveraging other real estate owned by the company principals to collateralize a short term loan that will be used to make the down payment on the building.
Approach & Analysis
- Performed a review and analysis of client’s balance sheet and debt schedule, looking for opportunity to create a more efficient borrowing structure.
- Offered a line of credit secured by short term assets to assist in working capital and provide the buying power needed to make large inventory purchases when needed and take advantage of account payable discount terms.
- Recognized the advantages of the client purchasing a new headquarters building and offered a creative solution to preserve liquidity when purchasing the new headquarters by leveraging other assets for the down payment.
Recommendations & Results
The combination of consolidating credit facilities and providing a line of credit simplified and eased cash management. Currently, purchasing a new headquarters will result in consolidation of production and warehousing operations while also creating a long term asset for the company’s owners.