Historical client was seeking assistance in obtaining funding lines for new equipment acquisitions and working capital, whilst dealing with a $750K ATO arrears amount.
The business was growing rapidly due to demand from existing clients and new customers due to reputation and service. A few critical items occurred specifically as a result of their growth – a significant number of capital acquisitions required to service current and future works and working capital strains which was evident by the ATO position.
The ATO was supportive of the business and had entered a payment arrangement without the need for a significant reduction in the debt for a first payment. This allowed the client to budget and forecast as an amortising debt facility over a 3 year period. Having the payment arrangement in place and then clear evidence of serviceability the equipment finance options where sort to fill immediate capital acquisition requirements. First and foremost was replacing any assets on rental, which provided an immediate positive outcome to the cash flow and then moving onto additional asset acquisitions. Traditional equipment financiers were not a solution for the applicant at this stage due to the ATO arrears. Second tier financiers were accommodating with the ongoing funding needs and due to the overall funding requirement, the need for multiple funders was critical given assets ranged in value up to $800K for a trenching unit.
Traditionally, second tier funders come at a higher cost, however when comparing the cost of the rate versus ongoing rental or loss of income and underlying profitability, the decision was not about rate but what benefit the asset adds to the business and enhancement to profitability.
Once the critical asset finance was underway (and ongoing needs still going through) it was time to discuss and address the working capital issues. The business had an encumbered working capital provider however due to a significant portion of the invoices being issued under Progress Claims this eliminated these debtors from traditional Invoice Finance. Atlas then sourced an unsecured overdraft facility for the business providing a bridging solution between invoice finance and unfactored receivables. The company is finalising several new contracts which will see a new requirement to restructure and replace the current encumbered working capital partners with a more tailored solution moving forward.