Case Study One
This engineering business was introduced to ECS by one of our professional insolvency practitioner partners who had been asked to consider the viability of the company due to creditor pressures and a number of County Court Judgements (CCJ’s). Upon investigation the practitioner found that the business had a strong asset base, good quality debtors but the cash management of the business was poor. His opinion was that the business did not need to seek to make an arrangement with their creditors but simply needed to introduce additional capital into the business to clear existing creditors. The practitioner recommended some management controls to avoid this situation arising again and referred the client to ourselves.
ECS were able to quickly review the clients’ current creditor position and appraise the asset bank of the business. As an asset intensive operation the company owned a number of high quality engineering machines which were partially encumbered. The solution was to introduce new capital into the business by refinancing the existing engineering equipment (and settling of the existing Hire Purchase debt) providing enough cash to repay a large majority of the creditors to date. To assist with future cashflow a factoring facility was established that realised 96% of the sales ledger immediately, so creating good working capital and at the same time employing the services of the factors credit control department to ensure that all future debt was collected efficiently.
The company has since been able to use the new expanded working capital to make spot purchases of steel at significantly discounted prices and have been able to save 5% on purchases by early settlement of accounts.