CASE STUDY
The Client:
A large food and beverage operation with nearly $1 billion in revenue producing packaged food products for major retail outlets including grocery chains, big box retailers, and foodservice distributors. Operating in the competitive contract manufacturing and co-packing sector where scale, production efficiency, and the ability to meet demanding volume requirements determine success in landing and retaining major retail contracts, the company had secured substantial growth opportunities with blue-chip customers requiring significant capacity expansion. With EBITDA-positive operations demonstrating underlying profitability and established relationships with nationally recognized retail brands, the business represented a substantial platform in the food manufacturing industry that needed capital to capture major contract opportunities that would drive long-term growth and strengthen market position.
The Challenge:
The food and beverage operation needed $42 million to expand processing capacity with equipment and infrastructure supporting growing contracts with major retail outlets, but faced a complex financing challenge that would stop traditional lenders. The capital requirement involved acquiring equipment from seven different vendors with varying payment terms and delivery schedules, requiring sophisticated project disbursement management to coordinate multiple suppliers simultaneously. Despite nearly $1 billion in revenue and EBITDA-positive operations, the company’s debt service coverage ratio sat below 1.0x—an immediate disqualifier for conventional lenders who view sub-1.0x DSCR as indicating insufficient cash flow to service additional debt. Large customer concentrations created another red flag, as substantial revenue dependency on a few major retail accounts introduced concentration risk that traditional underwriting criteria penalize heavily. Most critically, the transaction required very fast turnaround with impending equipment deposits due or the company would lose equipment allocations, causing delays that could jeopardize customer relationships and result in lost business from retail partners demanding capacity commitments. Without a lender who could move with extraordinary speed, coordinate complex multi-vendor disbursements, and underwrite based on contract economics rather than current DSCR, the company would miss a transformational growth opportunity.
Solution:
First National Capital recognized that large-scale food manufacturers with billion-dollar revenues and blue-chip customers deserve financing support even when DSCR temporarily falls below traditional thresholds due to growth investments, and that the contracted revenue from major retailers provided genuine cash flow visibility that justified equipment financing. Rather than attempting to approve the entire $42 million request through a single lengthy underwriting process, FNC broke the financing into three smaller transactions, obtaining approval within 30 days of the signed term sheet for the first processing line and securing approval for the remaining two lines shortly thereafter—dramatically accelerating execution compared to conventional approaches. First National Capital administered all invoices and payments to the seven different vendors involved, providing comprehensive project management that ensured smooth funding throughout the project while saving the customer substantial time and money on administrative services they would have otherwise needed to coordinate internally. The structure featured 100% advance rate requiring no down payments, no financial covenants that could constrain operational flexibility, no personal guarantees from ownership, and equipment-specific financing that allowed the customer to maintain existing bank lines without conflicts of interest or cross-default risks. By strategically segmenting risk into three separate transactions, First National provided the customer with valuable flexibility to delay purchase of the third processing line if needed without any impact to existing financing, accommodating the reality that major retail contracts can shift timing or volume commitments. This comprehensive $42 million solution enabled the food and beverage operation to capture major retail growth opportunities, expand capacity to meet blue-chip customer demands, and establish First National as the complementary CapEx funding partner capable of moving quickly on complex, large-scale equipment financings that traditional lenders decline due to DSCR or concentration concerns.
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