The company manufactures pivotal drilling equipment for the construction industry in the South.
With the recent declines in the oil & gas industry and slowing equipment demand, sales were stagnant and starting to decline. The customer sought a major OEM financing arm to drive capital and increase cash flows from the asset base, but would only receive a small advance against the collateral. With short term amortization creating tight cash flow when compared to the rental revenue generated, the client was forced into working with a high-rate equipment finance firm that was an inadequate solution for their needs.
Taking on extra debt to a balance sheet is always concerning to a bank, but First National understood that with a RPO (Rental Purchase Option) strategy, the customer could improve cash flows and assisted the customer in selling additional equipment. This solution allowed the customer to build equity into the equipment if the final RPO user decided not to purchase the equipment while they built out a rental fleet. First National put together an attractive CAPEX line of credit with on and off balance sheet terms. The client was also given flexibility to sell the equipment mid-contract without penalty if their client exercised their rental purchase option. First National provided more capital, better cost of capital, greater flexibility, and excellent client service that resulted in the customer’s record setting year of revenue and profitability.