Trek Plastics have been navigating the South African business landscape for over half a century, first as a tool & die manufacturer then expanding into the plastics industry in 1978. In 2015, landing a lucrative contract appeared to be a dream come true for the Port Elizabeth-based company but cash flow restrictions threatened to derail the golden opportunity.
Managing Director and owner, David Truter, was quick to realise that the new contract to supply Ford Engine Plant packaging for their export components was a mixed blessing.
He told us: “Ford’s required payment terms were in excess of our normal 30 day period which meant that we needed to effect payment to suppliers prior to the receipt of the money from our debtors. Our book increased by nearly 50% and our cash was effectively locked up in paper!”
At the time, Trek Plastics opted to make use of an invoice discounting facility with one of the commercial banks but a number of limitations led them to seek assistance from independent finance house, Merchant Factors.
He continued: “Dealing with our bank for an increase in our overdraft/invoice discounting facility was lengthy and tedious but, since having been referred to and taking up a facility from Merchant Factors, all I need do now is make a call and submit updated sales and cash flow projections. Provided that the projected value of our debtor’s book can support the required increase, I am able to secure access to cash in the form of an agreed percentage of the additional invoicing.”
After the taking up facilities offered by Merchant Factors in May 2015, Trek Plastics have seen their business grow significantly.
“Since the move, my turnover has doubled and has increased from just over breakeven to a healthy profit, largely due to the confidence that we have in our ability to take on the big contracts, with new customers properly credit checked by Merchant Factors before manufacture and delivery, and having more time to ‘do business’.
The personal contact with decision makers enables me to concentrate on running my business without always having to worry about cash flow.”
Find out more about how Merchant Factors can help your company during times of growth and expansion.