This company specialised in the provision of staging, lighting and public address equipment for outdoor events such as pop concerts. Cash flow was very seasonal with generation peaks in April-September and troughs in the winter months.
It needed to order in December a £300,000 mobile stage from a Canadian manufacturer for delivery in March, but did not have the 50% cash deposit wanted by the supplier. Its bank would not lend against assets not built or not in the UK.
We introduced two sources of funds, one short term, the other long term. The latter, a leasing company, agreed to underwrite the customer and finance the £300,000 purchase price over three years but only when the equipment was in the UK. The customer signed their corresponding lease contract, which would start three months later once the equipment could be inspected by the leasing company. We then showed the signed lease agreement to another company (STF) which provided short term “transaction” finance, in this case “import financing”.
The UK leasing company confirmed that it would pay £300,000 when the equipment arrived in the UK.
On that basis STF paid the Canadian supplier a deposit and gave guarantees to purchase the equipment outright when it was ready to ship.
In the interim, STF charged the customer a monthly fee of 2% of the money paid out but most of this was only for the 6 weeks between shipping and arrival - and paid freight and VAT etc. Once STF had brought the equipment into the UK, the leasing company paid it £300,000, and the customer started paying monthly lease instalments so that after three years it would own the equipment.