Working Capital Financing For a Fashion Company
The Situation
Our client was an online women’s clothing retailer with prices that gave the best high-street retailers a run for their money. It’s often the case that paying low prices will often come at the consequence of quality, not with this business.
Differentiating themselves by selling quality, off the label, branded clothing at premium discounts, sometimes as much as 90% off RRP, the business had entered into a high growth stage as more and more customers caught on to their high-class clothing. That, coupled with uploading new stock onto their website every single day, meant that customers could not get enough. With a business model that was displaying great potential, the directors and their investors had already invested £2m into the business, with aspirations to expand it even more. As demand was ramping up, the directors wanted to invest further into their customers user experience. With a vision to develop the website, introduce a mobile app and improve their other marketing platforms. Still, in their early stages of growth, the business had not yet turned a profit; but as their marketing campaigns started developing momentum, and inventory management was becoming more streamlined, this milestone was not too far out of reach. The owners therefore needed a working capital financing funding solution that would accommodate for a start-up business.
Where We Came In
To accomplish the owners’ latest ambitions, a new round of financing was needed. Despite numerous offers for finance from various private equity houses being available, the owners wanted to utilise debt finance first, to avoid excessively diluting their equity at this stage.
With cash running low and finance needed within the next 2 weeks, the business ran into challenges sourcing debt finance.
Eager to start their next chapter of growth, the business was introduced to us through a broker, to see if we could help provide the fast and flexible finance they needed.
We spoke to the business owners and were struck by their enthusiasm. They demonstrated a clear strategy and plan on how the additional funding and spend would deliver value to their business.
After chatting with the owners to find a solution to how we could deliver the funding needed, the owner asked if we could take a charge over a BTL property they had to secure the loan. Even though the property was unrelated to the business and they were in their early stages of trading, by understanding their business model and how our short-term finance could help support their growth, we offered the business £500k to help them achieve their latest ambitions.
The whole loan process lasted no more than two weeks, delivering the well-needed funding in tight time-frames without diluting any equity. Moreover, the owner was delighted that we could use security unrelated to the business to accomplish this
Term: 18 Months
Timing: 7 Days
Security: 1st Legal Charge over residential property | Debenture over the borrower and trading company | Cross corporate guarantee | Personal guarantees.
The Result
The directors were successful in developing their new marketing platforms, overall product offering and marketing campaigns. So much so that they asked us to lend them an additional £250k, so they could continue the growth they had seen from our initial funding.
After this, they received much more credible offers from equity investors. This subsequently paid back our short-term funding and has led the directors further towards their desired growth plans that could have easily been inhibited by taking on unsatisfactory equity finance.