Case Study
Furniture Retailer Cash Conversion Cycle
Furniture Company pays their Asian suppliers upon shipment and does not collect from their customers for 120 days after that payment.
Company is forced to front large amounts of capital to purchase inventory and wait to collect from customers, leaving little working capital in the business.
Investment Summary
Security: Unsecured
Investment Size: $15,000,000
Supplier Fee (Net to Client): 8%
Company Revenue: $600,000,000
Deal Structure
Supplier credit transaction with the purpose of giving Furniture Retailer
ability to better manage their long cash conversion cycle.Zenith will provide Furniture Retailer $15,000,000, in which Zenith will pay Asian suppliers directly upon shipment and give the Furniture Retailer 180 days to repay Zenith. This will give the Company time to collect from their customers and use the proceeds of the inventory to repay Zenith.
The Company now does not have to come out of pocket to purchase inventory from Asian suppliers, maximizing working capital . Zenith’s true cost is competitive with banks even though we are unsecured and flexible, having no covenants or restrictions like most ABL facilities.