Bank Participation Line of Credit Secured by Accounts Receivable

Distributor of Frozen Baked Goods


THE SITUATION: The Company is a frozen food distributor that primarily services school systems, healthcare providers, restaurants, and the hospitality industry. Historically, the products were bought from third party suppliers and delivered to the purchaser via third-party transporter. New targeted prospects include regional chain restaurants, grocery stores, and military bases. Breakfast foods comprise a majority of their sales, but the Company also offers a wide range of gourmet breads, rolls, and desserts. In order to control quality, production, and logistics of their products, the Company decided to build their own storage and manufacturing facility. The owners believe that by taking control of the warehousing & staging portion of the logistics, orders will be processed promptly and more accurately. After spending a large amount of internal capital on the new facility, the Company was looking to increase their current bank line of credit to help with projected growth and on-going working capital.

THE PROCESS: The Company approached their current bank about increasing their line of credit due to expected growth and cash flow needs. Despite being profitable, the Bank was hesitant to increase their current line by the requested amount due to the Bank’s current level of debt extended to the Company to finance their new facility. The Bank approached Southeastern about the possibility of partnering to make the Loan structurally sound by the Banks’ standards and provide the Company with additional working capital it needed to fund growth. Southeastern would lead the credit and monitor the collateral (daily/weekly) while the Bank would control the relationship and, through their participation, provide more competitive blended pricing for the Company.

THE RESULT: Due to the Banker providing a solution to their client, the Bank was able to keep the Company’s depository relationship including treasury management services. The Banker will keep an eye on the Company’s progress with the intent of graduating the line back into the Bank after the Company stabilizes and is less reliant on the line to fund daily operations. The result was a win for all parties involved.