Lean Financing for an SME of the textile industry

[custom_headline type=”left” level=”h2″ looks_like=”h4″ accent=”true”]Company[/custom_headline]
Our client is a medium sized company with a thirty year experience in luxury fabrics dyeing and finishing and is well known as a leader in an important Italian silk district. It is part of a national network which includes upstream processes like yarn twisting and weaving and downstream processes including some of the most innovative Converters. Its customers are some of the best known brands in the luxury fashion.

[custom_headline type=”left” level=”h2″ looks_like=”h4″ accent=”true”]The Challenge[/custom_headline]
An unexpected 50% sales growth in the last three years made two strategic choices necessary. On the one hand it made necessary to increase production capacity and flexibility with the acquisition of new equipment for cleaning and dyeing ; on the other it made convenient to completely internalize the finishing phase. In order to implement these strategies the company needed to make investments in manpower and equipment which self-financing could not cover. As a consequence it was necessary to resort to bank financing. But the first approach to the banking system was disappointing because banks judged the request of funds too large in relation to both revenues and net capital. In addition the textile sector was judged too risky.

[custom_headline type=”left” level=”h2″ looks_like=”h4″ accent=”true”]The Action[/custom_headline]
The purpose of our project was to help our client override the unfavourable initial rating and find the right financial resources. We started with an analysis of the organization, of its governance, of the soundness of its strategy and of the quality of its management and of its control system. After this we evaluated the company’s competitiveness, its positioning in the market, the realism of its business plan and its capacity to survive and prosper in the future. Our conclusions about company’s solvency based on the above in depth analysis were passed to our partner Eurobroker Italia – a leading financial broker in Italy – who entered the relevant data into the marketplace DoubleDoor which provided a comprehensive rating based on quantitative as well as on qualitative information.

[custom_headline type=”left” level=”h2″ looks_like=”h4″ accent=”true”]The Results[/custom_headline]
The qualitative evaluations we provided were the decisive factor to override the initially negative attitude of the banking system. The support of Eurobroker Italia made it possible for our client to get in a short time a ten year loan for an amount of one fourth of the revenues at a rate significantly lower than the market rate. That allowed our client to start its investments. This example shows that ratings based only on quantitative information can be overrided by sound qualitative information and that the support of a competent broker can reduce times and costs.