An established fashion retailer headquartered in New South Wales needed to supply goods to a large department store. However, this one single debtor made up an 80% concentration of their $20+m annual revenue.
The business had an offer from a large non-bank debtor financier for $3m at 80% accounts receivables and a 50% concentration limit, against a ledger of $5m, with their largest debtor representing 80%. This meant that the company would only ever be able to draw on approximately $2.5m, leaving the other 50% unapproved and ultimately unfunded. With no additional assets to seek funding against, they would’ve ended up in a cash flow trap.
Octet offered a solution that not only allowed the company to get paid 100% of invoice value instantly (with no concentration limits), but it also involved an easier set up and less administration compared to traditional debtor funding.
The company was initially offered $3.5m Trade Finance combined with a Debtor Finance facility, established with the option to go up to $5m depending on its growth trajectory.
It was a win-win outcome as the Supply Chain Finance facility allowed them to push out their payable days at no cost to them, whilst providing their suppliers with 100% of the value of their invoices, paid as early as desired.
By partnering with Octet, the company received $3.5m in immediate funding – a 75% increase on their other offer. Their limit was subsequently increased to $5m after three months to accommodate growth. Meanwhile, their department store buyer received an additional 15-20 days at no cost, leaving gearing and banking covenants untouched.