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Custom Woodworking Company

 

SITUATION:

 

Formed in 2006, this subsidiary of a foreign parent company manufactures doors, cabinetry and drawers for a variety of companies across the United States.  Historically profitable, the company’s door business grew exponentially in 2010 as they signed a contract with a national distributor.  Despite the significant increase in business, margins were thin; and growth came at the expense of the company’s core business and other customers.  When the company suffered their first ever loss in 2015, they decided to sell the door division and refocus on the core business.  Soon after, the company’s bank placed them in Special Assets and asked them to find another lending solution.

 

SOLUTION:

 

After meeting with the company’s management, the Magnolia team looked past the previous challenges and immediately recognized the potential opportunity.  With a clear turnaround plan in place, Magnolia immediately offered the company a $1.45 million working capital line of credit secured by Accounts Receivable and Inventory.  The company was impressed that Magnolia’s proposal did not include any annual facility fees, no audit fees and no early termination penalty.  The funds provided by Magnolia were used to pay off the existing bank line and provide additional working capital needed to execute the turnaround plan.  The company now expects to return to profitability and qualify for a conventional bank line of credit in the near future.