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Precision Metal Stamping Company


Formed in 1984, this company originally began as a Tool & Die Shop but over the years evolved to provide precision metal stamping and machined components primarily for the automotive and major appliance industries. The company enjoyed robust sales and significant profits until some major customers began to “phase out” select programs in 2013. With fixed overhead, the company was unable to downsize quickly enough resulting in operating losses over three consecutive years. After year three of the negative trend, their bank placed them in their Special Assets Group.

 

Subsequently, the company was successful in replacing some of the “phased out” programs and was projecting a profit in fiscal 2016.  However, due to customer delays in the implementation of certain programs the company failed to fully realize projected sales and sustained a loss for a fourth consecutive year.

 

The company turned the corner in early 2017 as the delayed programs came to fruition improving top line results. The owner identified the need for additional working capital to support continued growth and approached their local community bank for a working capital line of credit.

 

Unfortunately, the bank was unable to get around the historical losses and provide the needed working capital support. Instead of simply declining the prospective customer’s request, the banker introduced Magnolia Financial as an alternative solution.

 

Magnolia met with the company’s management team and immediately recognized their expertise and commitment to their business.  Instead of concentrating on the historical losses, Magnolia focused on the company’s backlog and opportunity for growth.  Within 3 days of the initial discussion, Magnolia Financial issued a proposal for a $650,000 working capital line of credit secured by only Accounts Receivable and Inventory. 

 

Despite having other Asset-Based Lending ("ABL") proposals in hand, the owner recognized the flexibility the Magnolia proposal offered including a month to month contract with no early termination fees.   Additionally, Magnolia also allowed the company to only borrow funds when needed without any minimum funding requirements or unused line fees.

 

Proceeds from Magnolia’s initial funding were used to refinance the company out of their former bank’s Special Assets Department and provided additional working capital to meet the projected growth.  The company is now well positioned to enjoy their first profitable year in the last five.  Without the flexible working capital facility provided by Magnolia Financial, the company would not have been able to execute on its turnaround plan.

 

The referring banker was able to provide a solution to a prospect where they were currently unable to provide financing.  As a result, the company is moving their deposit relationship to the new bank and the referring banker is now looking to refinance the owner occupied real estate loan.

 

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