CASE STUDY
The Client:
A packaging and printing manufacturer serving major consumer brands, the company competes in a segment where contract wins are earned through print quality, turnaround reliability, and production capacity. After years of disciplined operation, the company secured the kind of opportunity every middle-market manufacturer works toward: a major new contract with a blue-chip customer, large enough to transform the scale and trajectory of the business. Fulfilling it required a $22 million investment in digital press and finishing equipment, the production backbone of the new program. The company had the operational capability, the management team, and the customer commitment. What it did not have was a balance sheet that conventional lenders would fund at the moment the capital was needed most.
The Challenge:
The contract win arrived with a capital requirement that outran the company’s financial profile on paper. The equipment carried a 12-month lead time, meaning the company would commit to $22 million in spending a full year before the machinery produced its first dollar of contract revenue. Debt service coverage stood at roughly 1.2x, cash on the balance sheet was thin, and liquidity availability was limited. At the same time, the company’s capital structure was in motion: a new equity partner was coming in, a group of preferred equity shareholders was being retired, and the senior lender had to consent to additional external debt in the middle of that transition. Any one of these conditions slows conventional credit. Together, they stop it. A thin coverage ratio reads as a decline on a scorecard, a year between commitment and installation means funding equipment ahead of revenue, and a capital structure with equity entering, preferred holders exiting, and a senior lender protecting its position requires a financing partner willing to align parties who do not naturally share the same priorities.
Solution:
First National Capital had known the company for nearly three years before the contract was signed, and that relationship became the foundation of the transaction. Rather than underwriting from a scorecard, First National’s team visited the operation and came away confident in management’s ability to execute the new program. The firm provided $22 million for the long-lead-time equipment, structured with progress payments through the build and installation period so the company could preserve cash flow during ramp-up instead of funding equipment a year ahead of contract revenue. Just as critically, First National did the alignment work the moment demanded: working directly with the incoming equity partner to create a seamless transition, coordinating with the senior lender so the new equity and new debt fit together, and giving the equipment vendor confidence that the financing would close and it would be paid. The result was a transaction that moved every party in the same direction at once, funded a transformational contract on the company’s operational timeline, and demonstrated the difference between a credit scorecard and a capital partner: the contract that changes a business almost always arrives before the balance sheet that would satisfy a conventional lender, and First National structures for the business that is being built, not the one the ratios describe.
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