Canada ยท Food distribution
A regional food distributor had outgrown its existing bank facility and needed a single package that reflected the full value of its receivables, inventory and equipment.
The business had added two new customer contracts that increased both its receivables and the inventory it needed to hold, but its bank facility had not been resized in over two years.
Margins in food distribution are thin, and the company's earnings based borrowing capacity understated the true security value of its balance sheet.
We moved the conversation from an earnings based facility to an asset based one, commissioning inventory and equipment appraisals to establish realistic advance rates.
Two asset based lenders were approached with a full borrowing base model. We negotiated seasonal overadvance capacity to cover peak inventory periods ahead of major retail buying seasons.
A CAD 10m asset based facility was agreed, combining receivables, inventory and equipment into a single borrowing base with room to flex seasonally.
The company funded both new contracts without a covenant breach at its next peak season, something the previous facility would not have supported.
Details are anonymised. Figures are rounded and identifying information is removed or altered to protect client confidentiality. Past transactions are not a guarantee of future outcomes.
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