The Customer
The brewery was established in 2016, and aimed to target a socially conscious audience by producing a number of products which are both vegan and gluten free – utilizing local produce to create a unique product for Midlands based clients. Their initial trading operation had been a significant success and as such they had attracted national attention and had seen increased growth in wholesale trade including orders from leading supermarkets.
The business had been funded by a mix of asset finance, directors loan and a small cash flow loan. These had facilitated the establishment and infrastructure of the business, with the directors funds being used to fulfil payments to staff and marketing, however the business needed access to additional funds in order to effectively grow.
Since incorporation, the business operated three income streams:
- On site, the brewery had a bar from which they sold all of their creations, as well as a select few wares produced by other local distilleries/breweries. This operation generated 20% of the turnover of the business and was through local footfall and tours of the premises.
- Also on site there is a small shop through which B2C and proforma B2B sales are operated from; this equated to circa 5% of the business turnover.
- The business had in recent years seen a significant uptick in their B2B wholesale trade. Local bars/restaurants initially sought to offer local beers and as such our prospect fulfilled this need on an invoicing basis. The terms were originally agreed to be proforma prior to the pandemic but customers were requiring extended terms of 30 days post lockdown when their own cashflow was tight. 75% of the turnover was generated within this stream.
The Goal of the Business
Following success supplying to businesses in their local area, wholesalers and national supermarkets reached out to our prospect to become stockists. These businesses required set terms of 30 days date of invoice.
The brewery’s goal was to grow their business sustainably over the next 12 months and fulfil the ever larger orders that were coming in. They were excited by the increase in orders they were getting, however they were nervous that they would be unable to facilitate the orders without assistance from a third party.
The Challenge They Faced
The brewery needed an invoice finance facility to enable them to fulfil the increase in orders that they were getting from the local bars and restaurants as well as the national supermarkets. As the credit terms had been stretched from pro-forma to 30 days, the brewery needed access to cash to pay suppliers, pay wages and to increase their marketing capability to effective grow their business over the next 12 months and beyond.
The Solution We Provided
Invoice finance was a suitable option for our customer’s B2B sales and enabled them to access funds from their invoicing early in order to focus their efforts on the next order.
As the order book was becoming ever more substantial, the business understood that their own in house credit control would be stretched as there would be ongoing chasing of invoices which is laborious and time consuming. The brewery decided upon a factoring facility where the funder would chase payment of the invoicing direct relieving the potential stress, allowing them to focus on continuing to grow their order book.
The brewery opted for invoice finance due to the flexibility the facility could offer. Invoice Finance was able to generate 90% of the current outstanding invoices on their sales ledger and could provide an ongoing facility whereby they could receive 90% of future invoicing upon delivery of their orders. This provided the business with an initial cash injection and an ongoing cash flow facility which could grow alongside them, making cash available to them when required for wages, supplies or equipment. Invoice Finance is also unique in the fact that ongoing repayment is completed by their customers paying the funder directly to clear any advanced funds rather than strategizing a repayment plan over a period of time which could have stretched the businesses finances. The brewery also liked that the funder took time to understand their business and became an effective partner. Not only did the facility provide access to working capital ongoing, it also provided a credit control service for the business which took the stress of chasing payment away from the brewery and allowed the director team to focus on growing and marketing their brewery which is what they would much prefer to spend their time doing.
The Status of the Brewery Now
Since the brewery has gained an invoice finance facility they now have access to a lot more working capital which has taken much of the day to day stresses away from the directorship team. The business has the confidence to fulfil the orders they have worked so hard to gain. As they no longer need to spend a significant part of their day chasing payment of invoicing, the directors have been able to not only focus on marketing their business but have also been able to experiment with new flavours and have recently produced a new product which they believe could be a best seller in their local area. The initial cash injection enabled the Brewery to reduce their creditor liability and leave a cash availability for a rainy day.
The brewery is now in negotiations with their suppliers, offering to pay them on shorter terms for a reduced price now that they have access to these funds and the backing of a substantial funder. The negotiations are likely to lead to a position whereby the cost of the facility is almost nil when the cost savings from paying their suppliers early are factored in.
The business turnover is growing rapidly and they are incredibly excited about where the growth could lead them over the next 12 months and beyond.
For help with Motorsport Beverage or Brewery Finance for your business, call us on 01908 92 62 62 or hit APPLY NOW.