Facts
Background
This
had been a highly successful precision engineering company that had hit hard
times partly as a result of a large bad debt and a lean period for sales which
had run up losses of £290,000. It had secured a repeat order of £550,000
for a second chemical process production line for a customer in the Middle
East. This contract would make a contribution to overheads of £350,000
over 3 months as the labour intensive jigs from the first contract could be reused
and on its own could return the company to financial health.
The
problem
The company couldn’t fund £150,000 for the specialist metal raw materials
required. The bank had declined to fund the contract and concerned about
its exposure had appointed a large firm of investigating accountants. The
situation was on a knife edge – if the raw materials could not be purchased
within the next couple of weeks the Middle East order would be lost.
Solution
McTear
Williams & Wood reviewed the forecasts and the costings for the Middle East
contract and confirmed the directors’ view that this could put the company on a
strong financial footing. Business angel funding would have required the
directors to give up control of the company and crowd funding could not be raised
in the time available. The solution was to partner with one of the
company’s specialist metal suppliers in return for a premium of £25,000.
McTear Williams & Wood’s endorsement of the forecasts an contractual
arrangements for the Middle East contract sealed the deal.
Difference
Most insolvency practitioners would focus on the company’s insolvency and not
consider that a key supplier might be willing to extend further credit in
return for charging a premium price. We did, the contract completed
successfully and the bank supported the company by holding the overdraft
facility until the contract completed. An administration was avoided and
the company was restored to good financial health.