How a NSW fashion retailer secured $5M without concentration limits to supply major department stores

This established NSW fashion retailer had achieved impressive scale, generating over $20 million in annual revenue. They had successfully secured a major customer relationship (supplying goods to a large department store) that demonstrated the quality of their products and the strength of their market position.

However, this success created an unusual funding challenge. The department store relationship was so substantial that this single debtor represented 80% of their total revenue. Whilst this concentration reflected a strong, reliable customer relationship, it created significant problems with traditional debtor finance providers.

The business had secured an offer from a large non-bank debtor financier that appeared substantial on the surface: $3 million at 80% of accounts receivables. However, the facility included a critical restriction—a 50% concentration limit. This meant that no single debtor could represent more than 50% of the funded invoices.

With their accounts receivable ledger totalling $5 million, and their largest debtor (the department store) representing 80% of that ledger, the mathematics created a funding trap. Due to the concentration limit, the company could only ever draw on approximately $2.5 million of the $3 million facility—leaving the remaining invoices from their major customer unapproved and ultimately unfunded.

This created several critical problems. The business would have $2.5 million in invoices to their largest customer that couldn't be funded under the facility. They had no additional assets to seek alternative funding against, meaning they couldn't bridge this gap. Despite generating over $20 million in annual revenue from an established, creditworthy department store customer, they would be trapped by insufficient working capital. The irony was stark—their success in securing a major customer relationship was preventing them from accessing the funding needed to supply that customer effectively.

The business needed a finance partner who could look beyond traditional concentration limits to recognise the strength of their department store relationship and provide funding that matched their actual business model, not arbitrary restrictions.

Octet assessed the situation and recognised that traditional debtor finance structures weren't appropriate for this business model. The department store relationship wasn't a risk—it was a strength. The customer was established, creditworthy, and represented a substantial, reliable revenue stream.

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 easier setup and less administration compared to traditional debtor funding.

The company was initially offered $3.5 million in combined Trade Finance and Debtor Finance facilities, established with the option to increase up to $5 million depending on their growth trajectory. Critically, there were no concentration limits applied—meaning their 80% department store relationship could be fully funded.

The structure delivered multiple advantages. It was a win-win outcome as the Supply Chain Finance facility allowed the retailer 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. This meant the fashion retailer could maintain strong supplier relationships by ensuring timely payments, whilst also managing their own cash flow effectively.

The facility was structured to work with their business model rather than against it. Instead of arbitrary concentration limits that ignored the reality of their customer base, Octet recognised the strength of the department store relationship and funded accordingly.

By partnering with Octet, the company received $3.5 million in immediate funding. That’s a 75% increase on their other offer. This wasn't just a modest improvement; it was the difference between having adequate working capital and being trapped in a funding shortfall despite strong revenue.

The results exceeded even this initial success. Their limit was subsequently increased to $5 million after just three months to accommodate their growth trajectory. This demonstrated both the business's strong performance and Octet's commitment to scaling support as client needs evolved.

The outcomes included:

• $3.5M immediate funding representing a 75% increase on the traditional debtor finance offer
• No concentration limits allowing their 80% department store relationship to be fully funded
• 100% invoice funding providing complete working capital coverage
• Easier setup and administration compared to traditional debtor finance
• Facility increased to $5M after three months to support continued growth
• Extended payment terms for their department store buyer at no cost
• Banking covenants untouched maintaining their existing banking relationships

Meanwhile, their department store buyer received an additional 15-20 days payment terms at no cost, creating value for the customer relationship as well. This was achieved whilst leaving gearing and banking covenants untouched, meaning the facility complemented rather than complicated their existing financial arrangements.

The business could now operate without the artificial constraints of concentration limits. Their success in securing a major department store customer was supported rather than penalised by their funding arrangements. With $5 million in flexible working capital and the ability to fund 100% of invoice values regardless of customer concentration, they could focus on growing their fashion retail business and strengthening their market position.

For fashion retailers and wholesalers with major customer relationships, traditional debtor finance structures with concentration limits can create funding gaps that penalise success rather than support it. When a substantial customer represents a large portion of your revenue, you need a finance partner who recognises this as a strength, not a risk.

Octet specialises in innovative funding solutions for the retail and wholesale sectors, with the flexibility to structure facilities without arbitrary concentration limits. We assess the quality of your customer relationships and business model to provide funding that works with your reality, not against it.

Talk to our team today to discuss how Octet's innovative finance solutions can support your fashion retail or wholesale business. We'll assess your customer relationships and revenue model to structure facilities that provide the working capital you actually need.