Republic Business Credit partnered with an industry expert to provide a scalable Asset-Based Loan for a plant-based products company.
When Republic Business Credit’s Jason Carmona, EVP, met with a natural food manufacturer at the Natural Expo West in 2019, they were in search of working capital to seed their accelerated growth prior to their next equity offering.
Republic is a proud supporter of the food and beverage industry, increasingly more in the natural, organic, vegan, keto, paleo and plant-based categories. The total food and beverage market is nearly half a trillion dollars and growing each year, while the natural food and beverage category represents 10.5% of the volume, but nearly 30% of the dollar growth volume across the total industry, according to several sources.
The company provides several branded plant-based food and beverages to large national organic grocery stores, along with several regional and independent grocers throughout California. The company's revenues exceeded $12 million in 2019, with the aim to double revenues in 2020. The company was growing faster than its profits, cashflow negative and had about 6 months of runway left.
The company sought a creative asset-based loan that would significantly extend their runway and that would bridge the cashflow gap, maintain their growth pace and increase the company’s value prior to their next round of equity financing. The company used Republic’s debt as non-dilutive cash to increase its valuation ahead of its next equity raise. As the CEO told Republic shortly after closing, “This debt facility will not only increase the value of our company, but it will allow all of the founders to retain a greater ownership of the company and maintain control through the next equity raise, without this debt facility, I could have lost control of the company.”
Republic provided a $2 million asset-based loan with no cashflow covenant requirements and a tangible net worth covenant it would only test after the first six months of the facility. Republic’s initial funding provided the founders the path to continue growing their top line revenue without the fear of running out of cash. Of the $2 million revolver, there was also an initial $1 million inventory sublimit to keep up with the ‘just in time’ demands of the national organic grocery providers.
Republic is excited about its growing portfolio of natural food and beverage companies. Jason Carmona, EVP, said, “Not only are we helping entrepreneurs grow their businesses, we are passionate about helping a category that provides healthy and generally more sustainable food and beverages that don’t contain all of the preservatives we grew up with. As a Californian, I am proud that our team is helping the natural food industry grow.”