CASE STUDY: Cosmetic company secures sustainable growth capital, while maintaining bank line with working capital provider 

Estimated reading time: 3 minutes

Background

Credit facility limit:
$400,000

General description:

Cosmetic and skincare product manufacturing

State of formation:

Florida

Customer type:

Major retailers including Walgreens, Costco, and Target

Issue

This Florida-based cosmetics manufacturing company had the chance to pursue new sales opportunities with two major retail giants. With a focus on cosmetic and skincare products, the company had already established itself as a supplier to well-known retailers such as Walgreens, CVS, Sephora, and Ulta. With a bank line in place, the company had recently completed approximately $4.5 million in business the previous year and was preparing to expand in 2024. The company management team was driving growth when it secured purchase orders with two major retailers, marking a milestone in its business journey.
Despite the company’s success, the existing business bank line from a regional bank was not sufficient to support the increased volume of production and demand resulting from the new contracts. Recognizing the limitations of the regional bank in providing a larger line of credit, the company was referred to our firm that could offer a flexible and non-dilutive financing solution tailored to its needs.

Proposed Solutions

United Capital Funding (“UCF”) proposed an asset-based, accounts receivable financing facility; which delivered a highly flexible working capital structure that is sufficient and flexible enough to grow along with their current increasing demand. Through this form of financing, the company was able to:

1. Maintain their long-standing relationship with their bank

2. Secure an adequate credit facility collateralized by their accounts receivable; then they could have otherwise achieved by leveraging their current balance sheet under their existing traditional revolving line of credit.

3. Increase liquidity to support new purchase order demand without raising dilutive equity capital.

4. Expand at an integral part of the company’s life cycle without restrictive covenants.

5. Decrease their overall Days Sales Outstanding by working with an institution that has been in business for 25 years supporting its customers with professional receivable management services.

6. Reduce senior management’s time and energy on cash flow management and therefore, allowing greater attention on growing revenues and ensuring customer satisfaction.