A Horny Problem (Published January 2005)
Read Update May 2006 >>
Colin
Campbell had a funding problem and was seeking equity finance, but his search
was failing. Colin is an engineer inventor with a product vital in today's ecological
world, yet virtually without competition. He was spending time seeking £250k
of finance to manufacture to meet his orders.
His company, Red Rhino Crushers
Ltd, makes mobile machines for crushing 20 ton/hr of concrete, kerbstones,
hard rock and even flint! Larger and smaller models are for different market
sectors. His crushers recycle building waste into aggregate for use on site,
saving transport and the tipping costs of landfill.
His machine had been made under licence and there were 50 in use, but the
licensee had collapsed. Demand was strong, but the 15 suppliers would not give
credit to Colin's new company.
All the components are bought in and a machine is assembled in just two days.
The crusher unit comes from India and the tracks from Italy; the other suppliers
are in UK. "Trade finance" need not mean "international trade".
"Red Rhino now use trade finance – rapid, economic and simple – when most finance
advisors told them they needed new equity . . ."
The customers are distributors, or leasing companies for users or hire companies.
All pay before delivery. Those who pay deposits get priority for delivery. Sales
thus far are in the UK, Spain and Ireland. The USA and Germany will follow.
Most machines are made to customer order, many with specified extras.
The elegance of our funding solution matches that of Colin's design. Our solution
was finalised within days of our first meeting; we then negotiated credit terms
with suppliers whilst Colin got his customers to put their orders in writing.
All suppliers give us normal credit, except the one in India who gets an LC
now but we hope to get credit from them soon.
Thus Red Rhino has a finance facility funded by credit we get from their suppliers
that they could not negotiate for themselves. Customers pay us before we pay
any supplier. The bigger the facility, the more we are in credit. They started
with a facility of £200k, sufficient to make 12-15 machines concurrently. It
is now increased to £350k to enable them to launch the other two models.
Red Rhino now use trade finance – rapid, economic and simple – when most finance
advisors told them they needed new equity – inevitably slower, more expensive
and complex.
To put it another way, the Rhino had "a horny problem" for which
a share "cap" was not the best answer! We recycle this solution as often
as we aggregate the enquiries.
Written by David Ross Director
Download
the Article 'A Horny Problem' at www.fairfaxgerrard.co.uk/docs/BusMon 0105
A Horny Problem.pdf
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