CASE STUDY
The Client:
A contract manufacturer specializing in canned beverage manufacturing and co-packing services for beverage brands, energy drink companies, and specialty drink producers requiring high-volume production capabilities and flexible packaging solutions. Operating in the competitive contract beverage manufacturing sector where production capacity, quality consistency, and the ability to scale rapidly determine success in landing and retaining major brand partnerships, the newly formed company had secured significant customer contracts that validated the business model and market opportunity. With less than three years in operation, the business represented an ambitious entrepreneurial venture in the capital-intensive beverage manufacturing industry where specialized canning lines, quality control systems, and facility infrastructure require millions in upfront investment before generating the production volumes and operating efficiencies that drive profitability.
The Challenge:
The contract manufacturer faced every obstacle that stops traditional equipment financing for early-stage businesses. As a newly formed company with less than three years operating history, the business lacked the track record that conventional lenders require for credit approval. Very little historical revenue combined with historical losses created financial statements that would trigger immediate rejection from traditional underwriting processes focused on past performance rather than future contract potential. The company needed large CapEx investment totaling $17 million to fulfill new customer contracts—a massive capital requirement relative to the minimal revenue base that would require financing equal to a multiple of annual sales. Rapid growth was consuming all available cash, leaving minimal liquidity and no working capital line of credit to smooth timing mismatches between equipment payments and customer collections. The majority owner refused to provide a personal guarantee, eliminating the credit enhancement that traditional lenders demand from early-stage businesses lacking corporate credit strength. The equipment required a 12-month delivery and installation period, necessitating progress payment financing that would fund vendors throughout the manufacturing cycle rather than a simple equipment purchase at delivery. Without a lender willing to finance based on contracted revenue and business potential rather than historical financials, accept the lack of personal guarantee, and provide sophisticated progress payment structures, the co-packer would be unable to fulfill customer contracts and the entire business opportunity would collapse.
Solution:
First National Capital recognized that start-up contract manufacturers with validated customer contracts and experienced management deserve financing support even when historical financials fail to meet traditional lending criteria, and that the contracted revenue from beverage brands provided genuine visibility into future cash flows that justified substantial equipment investment. FNC provided $8 million in immediate liquidity through a sale-leaseback against two existing production lines, unlocking capital trapped in equipment assets and restoring balance sheet strength without requiring asset disposition or operational disruption. For the new equipment purchases, First National structured progress payments throughout the 12-month project timeline, funding vendors directly as manufacturing and installation milestones were achieved rather than requiring the company to deplete scarce liquidity for upfront payments—further protecting cash reserves during the critical growth phase. The financing featured a 5-year term with balloon purchase option to minimize monthly payment obligations and preserve operating cash flow for working capital needs rather than consuming revenue with excessive debt service. Understanding that enterprise software was essential to scaling operations, First National included a new ERP system in the financing at the same 60-month terms along with soft costs related to engineering, delivery, installation, and implementation—expenses that traditional lenders exclude but represent essential investments for successful equipment deployment and operational efficiency. Most remarkably, FNC provided total funding equal to 42% of the previous year’s revenue with no additional covenants or operational restrictions, giving management complete flexibility to run the business and pursue growth opportunities without the constant covenant monitoring and reporting burdens that typically constrain early-stage manufacturers. This comprehensive $17 million solution enabled the contract beverage manufacturer to fulfill major customer contracts, scale production capacity to meet brand partner demands, and establish First National as the financing partner capable of supporting ambitious start-ups that traditional lenders automatically reject due to limited operating history and early-stage losses.
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