CASE STUDY: United Capital Funding provides post-petition Debtor-In-Posession (DIP) Financing


Estimated reading time: 2 minutes

Background

Credit facility limit:

$2,500,000

General description:

Sports equipment retailer

State of formation:

California

Customer type:

Walmart

Issue

This California-based company recently filed bankruptcy due to supply chain issues. They had a contract in place with Walmart to deliver sports equipment that was awaiting delivery from overseas. However the order did not arrive on time and therefore, the company missed the selling season. Unfortunately, this supply challenge, caused a substantial decrease in revenue and thereby, forcing the company to file Chapter 11.

Proposed Solutions

United Capital Funding proposed a solution to provide post-petition, debtor-in-possession financing through an accounts receivable factoring facility. Through this form of financing, the company was able to:

  • Gain court approval early in the process for UCF to purchase current accounts receivables, reviving  liquidity that would  work  to support the company’s future purchase orders with Walmart for the 2022 selling season .
  • Grow at an integral part of the company’s life cycle without restrictive covenants.
  • Work with an institution that has been in business for 25 years supporting its customers with professional AR management services to help reduce overall Days Sales Outstanding and that has experience working with other Walmart vendors.
  • Reduce senior management’s time and energy on cash flow management and therefore, allowing an even greater focus on growing revenues and ensuring customer satisfaction.

Conclusion

The company accepted the proposal and was approved for factoring with United Capital Funding. The above relationship will prove to be a beneficial capital structure with UCF as their temporary lender.

With the access to working capital and therefore, increased liquidity, our client can work executing its Plan of Reorganization, maintain its long standing relationship with Walmart, and return to their pre-petitioned business volume.


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