For any business, accessing capital to take advantage of emerging opportunities can be a challenging endeavour—let alone sourcing capital that is flexible enough to meet the business’s shifting priorities. For a Vancouver-based apparel company in need of a working capital loan to fund its next big strategic move, the business’s three owners were faced with a dilemma: source capital from a private equity investor and dilute their stake or scale back their ambitious expansion plans. Fortunately, there was a third option: a non-dilutive junior capital solution.
In 2018, the company’s owners approached First West Capital looking to grow the business. The company’s partners saw a market opportunity and wanted to accelerate their growth with an injection of capital—without disrupting their strong existing senior banking relationships.
Having established the business more than 20 years prior, the partners weren’t willing to sacrifice equity to fund their expansion plans. As a result, First West Capital was a natural fit.
With confidence in the company’s plans for growth and the strength of its management team, First West Capital partnered to structure a deal that would provide the business with the funds it needed to execute its strategy. In October 2018, a three-tranche deal was approved, providing the business with a lending structure that was highly tailored to meet its operational needs over the next 12 to 18 months.
Five months after receiving the first payment, the business wanted to restructure the capital allocation of the deal, shifting funds within the organization to act on greater opportunities. Based on the high degree of trust developed with the team, First West Capital was flexible on the use of funds and agreed to the change—a client request that would not be universally accepted by a capital provider.
In this scenario, trust and timeliness were two critical factors in the success of the deal between First West Capital and its client: trust in the management team’s decision to reallocate funds, and timeliness to supply capital in an industry with both seasonal and macroeconomic cyclicality. In the apparel business, you are either ahead of the curve or behind the times.
Fast forward two years to 2021 and the company’s strategy paid off: growing its brand considerably and increasing its financial valuation. This ultimately led to a successful buyout from a multinational corporation, where the partners will continue their journey toward building a world-class brand.
Whether your business is looking to Grow, Acquire or Transition, our team is here to support you. Get in touch.