How a Victorian trade signage company secured $2.1M in combined facilities during rapid expansion

This Western Australian labour hire business had built a solid foundation over more than a decade. Since their 2008 inception, they had successfully established themselves as a reliable provider of skilled labour to the mining, civil and trade sectors—industries that require dependable, quality workers and consistent service delivery.

The business had demonstrated financial prudence by remaining self-funded throughout its history, maintaining a healthy balance sheet whilst generating approximately $10 million in annual revenue. This reflected strong operational management and sustainable business practices over their 12-year trading history.

However, the business structure had become a constraint. Operating under a 50/50 shareholder split with one half being a silent partnership created complexities in decision-making and business direction. The managing director sought to restructure the ownership to take full control of the business and streamline operations.

This restructure created a significant capital requirement. The buyout needed to cover both the silent partner's loans to the business and their equity stake—a substantial sum that would typically strain working capital and potentially disrupt operations. The challenge was particularly acute because the business needed to maintain ongoing operational funding simultaneously. Labour hire businesses have specific cash flow pressures, including the need to pay workers before receiving payment from clients, which creates constant working capital requirements.

Additionally, whilst the business had a healthy balance sheet and strong revenue, 2020 performance was tracking toward a return to profitability—meaning they were in a transition phase where additional capital injection could accelerate their recovery and growth.

The business needed a funding solution that could serve dual purposes: provide the capital for the ownership restructure whilst also supporting ongoing business costs and positioning them to capitalise on their improving performance.

To assess the company's situation and recommend the best solution, Octet conducted a thorough review of their receivables position. This assessment discovered that the business had a major debtor with a 50% concentration of all receivables—a significant concentration that might concern traditional financiers. However, critically, this same debtor had a strong, positive payment history with the company, indicating a reliable, established customer relationship rather than a risk.

Based on this assessment, Octet recommended a disclosed Debtor Finance facility. The disclosed structure was important—it allowed for regular checks and payment tracking with full disclosure to the debtors, creating transparency in the funding arrangement and enabling direct engagement with the major customer if needed.

The facility structure provided several key benefits for the business's specific situation. It converted their accounts receivable into immediate working capital by providing access to up to 85% of invoice values. Rather than waiting 30-60 days for clients in the mining, civil and trade sectors to pay, the business could access funds immediately—crucial for both the ownership transition and ongoing payroll obligations.

The disclosed nature of the facility meant that debtors were aware of the arrangement, which actually strengthened the structure by allowing direct payment tracking and engagement. With the major debtor representing 50% of receivables but having a strong payment history, the disclosed approach provided additional security and transparency that benefited all parties.

The Debtor Finance facility served the immediate need of facilitating the change of ownership. The managing director and shareholder could use these funds to buy out the silent partner's share, covering both their loans to the business and their equity stake. This eliminated the need to secure external capital or disrupt operations to fund the buyout—the business's own receivables provided the capital needed for the ownership restructure.

The Debtor Finance facility achieved both the immediate objective of enabling the ownership buyout and the longer-term goal of supporting business growth.

Immediate outcomes:

• Ownership successfully restructured with the managing director buying out the silent partner's position
• Both loans and equity covered in the buyout without external capital or asset sales
• Operations maintained throughout the ownership transition without disruption
• 50% debtor concentration accommodated based on strong payment history

Ongoing benefits:

• Working capital for operations supporting payroll and business costs in labour hire's cash flow cycle
• New cash injected into business helping build on their ongoing success
• 2020 performance tracking well with expectations of quick return to profitability
• Disclosed structure providing transparency and strong payment tracking
• Positioned for growth with streamlined ownership and adequate working capital

With the ownership restructure complete, the business could now operate under clear, streamlined decision-making with the managing director having full control. The elimination of the 50/50 split and silent partnership removed structural constraints and enabled faster, more decisive business management.

The facility continued to support ongoing operations by converting receivables into immediate working capital. For a labour hire business that must pay workers before receiving payment from mining, civil and trade sector clients, this cash flow support was essential to maintaining service delivery and capturing growth opportunities.

With 2020 performance tracking well and expectations that the business would quickly return to profitability, the Debtor Finance facility provided the capital injection needed to accelerate this trajectory. The business could invest in growth initiatives, strengthen their market position, and build on their 12-year track record of reliable service to Western Australia's mining, civil and trade sectors.

For labour hire businesses managing ownership transitions, restructures, or simply navigating the cash flow challenges of paying workers before receiving client payments, Debtor Finance can provide the flexible working capital you need. Whether you need disclosed or confidential structures, we can accommodate your specific business circumstances.

Octet specialises in funding solutions for the labour hire sector, with experience supporting businesses through ownership changes, growth phases, and returns to profitability. We assess the quality of your debtor relationships—including concentrated debtors with strong payment histories—to structure facilities that work with your business reality.

Talk to our team today to discuss how Octet's Debtor Finance solutions can support your labour hire business through ownership transitions, growth phases, or operational funding needs. We'll assess your debtor ledger and structure a facility that meets your specific requirements.