Scaling Your Business

Rob Martucci
Rosenthal & Rosenthal, Inc.

In recent years, the food and beverage industry has felt the effects of rapidly changing consumer tastes and behaviors and the unpredictable retail climate that inevitably goes along with that. The competition for shelf space and brand loyalty has been fierce. As a result, nearly every food and beverage company at one time or another has experienced financial strain.

Whether a company is pursuing a large growth opportunity or simply struggling to maintain continuity, the value of alternative financing solutions has never been more critical in the food and beverage space. For businesses that are in the midst of closing a big deal, financing raw materials or investing in new manufacturing equipment, traditional loans simply won’t cut it anymore. Food and beverage companies today require a combination of alternative financing solutions that work in tandem with one another, without the disruption of bank regulations. With more flexibility and working capital from a mix of products such as purchase order financing, asset-based lending and factoring (with the added benefit of credit protection), businesses can focus on investing in product development, manufacturing, inventory management and marketing to ensure they remain top of mind with consumers.

Seafood suppliers and distributors in particular face unique challenges when it comes to financing their businesses. Because of the nature of their products, seafood companies carry inventories with considerably shorter shelf lives than other specialty foods or delicacy businesses. These inventories demand absolute precision for a continuous stream of perishable goods and require swift distribution to retailer or restaurant customers.

Financing these fast-moving operations so companies can keep up steady inventories can be a risky proposition for the typical lending institution. Traditional banks often shy away from taking on that kind of risk, especially with growing businesses. Tighter restrictive covenants and red tape that often go along with traditional bank financing can slow a company's growth and threaten overall business performance. 

For seafood companies looking for creative ways to stay ahead of the competition and keep their businesses running smoothly, it’s often difficult to see past the more obvious options available through traditional lenders. But two of Rosenthal’s recent seafood sector deals illustrate the kinds of alternative financing solutions available to companies within the industry – solutions that not only help alleviate common financial pressures, but also create new platforms for growth.

In the first example, a popular supplier of fresh fish to some of the most prominent retailers and restaurants around the world was seeking a new financing partner after its existing bank unexpectedly tightened the reins on its financing. Operating in a much more rigid lending environment, with tighter restrictive covenants in place, was simply not a long-term option for the company. As a direct result of this, they decided to seek out an alternative lender that offered more flexibility. 

Recognizing the value of the company’s brand and positive past performance, Rosenthal stepped in to provide a multi-million-dollar asset-based financing facility, including a significant line of credit and a term loan backed by the client’s brand name and other intellectual property. With that increased flexibility, as well as the additional working capital, the client was able to refocus its efforts on running its business and planning for long-term growth and profitability.

A separate deal involved an importer of some of the finest frozen seafood from around the globe and a completely different set of challenges, based on the client’s specialized inventory. Without warning, the company’s long-time existing bank implemented tighter restrictive covenants and the client quickly realized they would need to find a new financing solution. 

The company’s financial consultants recommended replacing the existing banking relationship altogether, so the client could secure the working capital it needed to continue to run its business, without outside interference. With a multi-million-dollar revolving line of credit, including a borrowing base against accounts receivable and inventory, the client was able to maintain the profitability it needed to continue its operations, without interruption.

In each case, the existing lending institutions – both traditional banks – had neither the appetite nor the flexibility to continue servicing the complex financing needs of their seafood clients. When dwindling financing options interfere with a company’s inventory and operations or, worse, threaten its overall financial health, it’s time to make a change. Just remember, when it comes to alternatives, there are plenty of fish in the sea.

For more information, visit rosenthalinc.com and contact Robert Martucci at 212-356-0958 or RMartucci@rosenthalinc.com.

Association of Food Industries: Serving the U.S. Food Import Trade Since 1906
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