Situation
This ISO Certified Machine Shop manufactures and distributes precision machined components to a wide variety of industries including aerospace, medical, and heavy industrial. The company services both regional and global manufacturing companies across the United States from their production facility in North Carolina.
In order to facilitate growth, the company made a significant amount of capital purchases to modernize and expand its production equipment. Soon after the expansion, a major customer paused their program which resulted in a considerable reduction in profitability.
Their bank continued to work with the company despite the negative financial performance but ultimately moved the line of credit to Special Assets. The bank eventually asked the company to find a new lender and introduced the owner to Magnolia Financial.
Solution
Despite the recent losses, Magnolia Financial was impressed with the owner and his management team. We took the time to understand the turnaround plan and an ultimate return to profitability. Magnolia realized the intrinsic value of the strong customer base and extended the company a $2,000,000 Asset-Based Line of Credit secured by both Accounts Receivable and Inventory.
The credit facility provided by Magnolia not only refinanced the company to get them out of Special Assets at their bank but also provided 60% more in availability. With the cashflow restraints now removed, the company is able to focus on their turnaround strategy without having to manage the business to a restrictive borrowing base. As a result, the company expects to be “bankable” again within 12-18 months.