The Bottom Line:
After a retrofitter of diesel particulate filters defaulted on its loan covenants, its lender wanted out of the credit. Stapleton built a realistic rolling 13-week cash flow and aggressively managed the company’s accounting team to reduce costs, leading to improved cash flow and a successful refinancing.
The Business Issue:
The company, a retrofitter of diesel particulate filters to comply with California Air Resources Board (CARB) requirements, was severely impacted by CARB’s recall and suspension of future sales of the company’s most popular products. Concurrently, CARB was not enforcing its requirements, reducing demand for the company’s services.
Genesis of Stapleton’s Engagement:
When the company’s performance declined due to the CARB recall and it failed to meet its financial covenants, its bank referred it to three financial advisory firms. The company retained Stapleton Group to assess and improve its short and long term finances and cash flow, and to liaise with the bank.
Obstacles and Stapleton’s Solutions:
- The company was suffering from deteriorated cash flow and projections were grim due to the recall.
- Stapleton worked closely with the owner to manage cash flow by reducing overhead and payroll and focusing on A/R collections.
- Stapleton reviewed inventory and A/R and prepared a liquidation analysis in the event it would be needed.
- The company’s bank wanted out of the credit.
- Stapleton was able to negotiate a refinancing after improving cash flow.
- Stapleton reviewed unencumbered collateral available for a new lender, including the owner’s primary residence, satellite service stations and 401k.
- The outcome of CARB’s recall of the company’s primary product was unknown.
- Stapleton researched the recall, projecting its impact on the company’s sales and future growth.
- Stapleton educated the bank, providing the company more time to refinance its loan.
- Stapleton helped the company replace its primary vendor, whose product was the cause of the recall, with products from alternative vendors.