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Case Study: Agricultural business facing cash flow issues

Background

We were instructed by an existing client of Armstrong Watson within the agriculture sector who was experiencing cash flow issues.  Our client was asset rich but had a liquidity issue having already extended its overdraft with its bank considerably to £700k from a previously agreed facility of £200k.   The Company’s funding requirement was the result of several poor crops due to supply issues which had impacted upon profitability.  The Company was in the process of pursuing a claim with its supplier.

What we did

Our work was completed in a multi-phased engagement with the initial phase being to understand the business and to review and comment on the Company’s current position.  From the initial review, it became apparent that the Company were extremely reliant upon the support of a major creditor and this was of considerable concern to the Bank. 

At the time we were engaged, the Company’s Bank had indicated that whilst supportive in the short term, they wished to see the Company’s indebtedness reduced to being within the pre-increased terms and were potentially looking to exit the funding relationship with our Client.

Results

We worked with our client and the Bank to monitor the Company’s position and to agree a phased reduction in the overdraft level over a period of 18 months.  Through profitable trading and a settlement of the supplier litigation, our client was able to repay the excess due to the Bank.

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