CASE STUDY
The Client:
A $125 million plastics processor utilizing multiple manufacturing technologies including thermoforming, extrusion, and rotomolding to produce recreational equipment and consumer products serving retail, sporting goods, and outdoor recreation markets. Operating in the seasonally cyclical recreational products industry where manufacturing must occur year-round but sales concentrate in spring and summer months, the company faces dramatic working capital swings as inventory builds during winter months before pre-selling season converts finished goods into cash. With established market position and proven manufacturing capabilities across diverse plastics processing technologies, the business had consistently grown revenue and production volumes, but this growth created escalating inventory storage challenges and capital equipment needs that strained both physical capacity and financial resources during the most cash-constrained periods of the annual cycle.
The Challenge:
The plastics manufacturer historically used operating cash flow to rent storage trailers for temporary inventory staging, but ever-increasing production volumes and inventory levels made rental expenses a significant ongoing drain on profitability. The need for additional inventory storage became most critical during the annual pre-selling season cash crunch when working capital was already stretched thin, and the company sought financing for 16-year-old used trailers to meet storage needs—assets that traditional equipment lenders would dismiss as too old and low-value to finance. The company wanted to realize 100% ROI from the trailer acquisition in approximately 18 months by converting rental expense to owned assets, but this required creative financing that recognized the economic benefit rather than simply applying age-based collateral depreciation schedules. Simultaneously, the business needed new thermoforming machines and associated equipment to expand production capacity, with a 6-month equipment lead time requiring progress payment coordination. On both transactions, the customer needed to preserve scarce cash during cash-tight months until seasonal inventory could be manufactured and sold, avoiding upfront equipment payments that would exacerbate working capital pressure during the most vulnerable period. Most critically, the company faced substantial credit capacity constraints with their senior lender who had reached lending limits and was obstructing access to additional capital precisely when growth and operational needs demanded equipment investment.
Solution:
First National Capital recognized that seasonally cyclical manufacturers require financing partners who understand working capital timing and can structure equipment financing to complement rather than strain cash flow patterns during vulnerable periods. For the trailer storage needs, FNC helped turn high rental expense into EBITDA improvement by structuring a capital lease on 16-year-old aged trailers that traditional lenders would automatically decline, recognizing that the economic value came from eliminating ongoing rental costs rather than collateral resale potential. Understanding that trailer needs would be ongoing as production scaled, First National established a CAPEX line of credit to fund storage trailers in multiple schedules and tranches as they became available, ensuring a streamlined process with fewer invoices while saving countless hours of administrative reconciliation and paperwork that would have burdened operations staff. For the thermoforming project including soft costs often excluded from traditional equipment financing, FNC structured financing that managed the 6-month equipment lead time with progress payments directly to vendors as manufacturing and delivery milestones were achieved. Critically, on both transactions First National funded with progress payments and structures that allowed the customer to preserve cash during tight months until seasonal inventory could be manufactured and sold, aligning equipment financing obligations with the natural cash conversion cycle rather than forcing payments during the cash-constrained pre-season period. By providing additional financing capacity that the senior lender had denied due to credit limit constraints, improving cash flows through rental-to-owned conversion, preserving working capital during vulnerable seasonal periods, increasing ROI through creative structures, and reducing administrative burden through CAPEX line efficiency, First National enabled the plastics manufacturer to solve both immediate storage challenges and long-term production capacity needs while navigating the seasonal working capital volatility inherent to recreational equipment manufacturing.
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