Milling Machines for an Engineering Firm

Posted On: 18 October 2019 Industry: Business

Finance Need: A relatively new engineering firm had won a contract to serve a well-known motor racing team. To support the contract, they needed to invest in new milling machines to assist with the increasing workload on existing equipment.

 

The Situation: Both Directors had first-hand experience of the racing world, driving for big named brands. As drivers, they knew there wasn’t a company able to make personalised parts for racing cars across all classes and so went into business together. They had been supporting the business by outsourcing work to a third party, but were missing out on higher returns. So, when they secured the contract from their Customer, they recognised they need to invest as the high levels of business would mean a) their margins would be eroded by outsourcing and b) their current instruments would be operating at maximum capacity with little room for down time. The machine required was priced at over £300,000 and for what is essentially a start-up business, this isn’t pocket money.

 

What Arkle Did: Arkle went to see the Customer and met with the Directors and Investors. From that meeting, alongside the pack of information provided, we instigated a detailed evaluation of the equipment in terms of lifecycle, depreciation and marketability and were comfortable with the asset and the supplier. Given the experience of the Directors, sight of the underlying contract and the revenue predictions from that, alongside evidence of a sizeable investment from an external investor, we were comfortable with the business's ability to repay and their sustainability.

 

The Finance Solution: Because we had undertaken a full evaluation of the equipment, Arkle was able to offer a seven-year facility for the equipment which reduced the cashflow requirements on the business. The agreement was secured against the equipment and personal guarantees, as well as a debenture on the company.

 

Arkle Comment: Using our experience and having the opportunity to meet and discuss the business with the Customer, we were able to create a solution to exceed the Customer’s expectations. We are currently awaiting a second order in line with phase two of their business plan!

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