Case Study 5
Trade Finance Intelligence
Introduction
A Ltd is a manufacturer and distributor of battery technology and energy storage systems with annual turnover c£3 million. The business was profitable, with a strong order book, however the business was experiencing creditor pressure.
The client had sold a consignment of ‘single battery cells’ to a Portuguese client for EUR446k. It was an established relationship with £1.5 million of products sold to date. The goods were held in a Portuguese warehouse to the order of our client and were not released until payment was effected by the Portuguese client. Due to a slow down in sales post Covid, the Portuguese client didn’t have sufficient working capital to pay for and take delivery of the battery cells.
In the meantime, the client was under pressure to effect payment of an outstanding balance of EUR180k of EUR336k for the battery cells which had been procured from a German supplier with whom the client had a long-standing relationship over 25 years. The German supplier was threatening to put the client on ‘stop’ which would have had an adverse impact on the client’s business.
Working capital facilities were provided via an Invoice Finance facility from Barclays who did not offer and flexibility. As the sale was an ‘export’, the client approached UK Export Finance who were unable to provide their guarantee as Barclays were unable to provide additional funding.
Challenges
A Purchase Order Finance facility of £150k was proposed which enabled the client to clear the outstanding balance with the German supplier and continue to be supplied with product.
Security was via a Debenture ranking behind Barclays who entered into a Deed of Priority and a PG. The Portuguese client eventually paid for and took delivery of the battery cells.
Whilst these type of facilities seem expensive, the client only pays when they use the facility. The client likes the flexibility and standby nature of the facility and continues to us the facility for other transactions.
