The Situation

Starting with a baby grow here and an old shirt there, this business was created to accommodate basements that could not take anymore. The business offered customers a convenient clothes recycling option via retail stores located throughout the UK or home collection, enabling people to recycle their old clothes for cash.

With a customer base in Africa and Eastern Europe, to whom they sold high-quality, recycled, fashionable clothing to at affordable prices, they filled a gap in the market that textile producers in these countries could not meet.

Business margins were typically tight as property and transport costs for the business were extensive. In search of a new stock sourcing option, the owners struck a deal with two large clothing retailers to purchase their surplus stock. This stock would then be re-labelled, sorted and shipped to their end customer – offering much more attractive margins than recycling due to being less labour intensive.

To enable the owners to act on this opportunity, they needed a working capital facility of £300k. As orders had not been placed yet, invoice discounters were unable to provide the working capital funding needed for the stock purchases. In addition, taking out a new facility with the bank would have also taken too long, risking the opportunity.

Where We Came In

With a timely and flexible solution required, we were introduced to the client via their finance broker to provide a flexible option to the working capital funding the business needed.

After meeting with the directors, we understood their plan and recognised this as a brilliant opportunity for the business to both satisfy the heavy demand from its end customers whilst also increasing its profitability.

We were happy to provide the company with the £300k of working capital funding required. In addition, to tailor this loan to the company’s needs, we accrued three months loan interest to help cover serviceability whilst the directors established operations and took in new orders. We also gave the client an 18-month loan term to give them comfort around repaying the facility. This provided the business with options to either refinance our short-term funding with an invoice discounter who could lend funds against the order book or via a refinance with a commercial mortgage provider on their existing premises.

Term: 18 Months

Timing: 2 Months

Security: 1st charge over commercial property | Debentures | Corporate guarantee | Personal guarantees

The Result

The business was successful in purchasing the stock and the increased margins benefited their bottom-line tremendously. Within 8-months, the business was able to refinance its property with its commercial mortgage provider on a longer-term facility. This request was supported by the increased margins the business had evidenced in trading. Furthermore, the business has continued to actively work with its new suppliers on new stock deals, portraying a great example of a business making the most of its opportunities.