Integrated finance opens new markets for in car entertainment company
Santander released the brakes on cashflow for an ambitious in-car electronics company
- Company turnover: £5.7 million
- Sector: Manufacturing
- Voyager-Systems is a consumer electronics company that designs and sells in-car cameras, DVD players, and specialist televisions, all for the UK market.
- Despite demand for its products, the company did not have the working capital needed to buy all the stock they needed.
- The company had received an invoice finance facility from a specialist provider, but this was insufficient in covering a cashflow cycle that could reach up to 300 days.
- Seeking alternatives, Voyager-Systems contacted Santander, who delivered a bespoke integrated trade finance and invoice finance solution. This provided funding across the entire cashflow cycle, from paying suppliers to receiving payment from customers.
- The business now has the working capital needed to win new supply contracts and market new product lines. Since securing the facility, the company has exploited demand for its products with a major internet retailer, launched a new in-car camera line, and increased sales to car companies.
Successful consumer electronics company Voyager-Systems had its origins on a long car journey. Co-founder Graham Lambert built an in-car DVD system in order to keep his children entertained. Before long, Graham was building similar units for friends and friends of friends. It was a small beginning for a business that has since grown into a leading supplier of in-car entertainment.
Co-founded in 1999 by Technical Director Graham, and Commercial Director Robert Grant, Voyager-Systems is now a £5.7 million turnover company with a 50% share of its market niche and a customer base that includes Halfords, Dixons, Maplin, Tesco, Amazon and several car companies. But in recent years Voyager-Systems has been hampered by insufficient funding. “We had got to the stage where lack of working capital was slowing the growth of the business,” says Robert. “The demand was there, but we didn’t have the available capital to buy the stock that we needed.”
The Santander solution
Santander provided Portable Multimedia with a solution in the form of an integrated trade and invoice finance package. Voyager-Systems designs its products – including DVD players, kitchen televisions and in-car cameras – in the UK and has them manufactured and assembled in Hong Kong and China. However, manufacturing in Asia creates a long cashflow cycle. Suppliers are paid up-front, goods are shipped to the UK, and then sold to retail customers who make good on the invoices many months later. “The cycle can be anything up to 300 days,” says Robert.
Prior to securing finance from Santander, the company had a partial solution in place in the form of an invoice finance facility from a specialist provider. Under the terms of the facility, Voyager-Systems could borrow against the invoice value of goods that had been pre-ordered by retailers and other customers, thus providing funds to buy stock. But these arrangements came with serious limitations, as Robert explains. “We didn’t have the funds to service all our potential customers, so we had to make choices,” he says. “We would focus on ensuring that we fulfilled orders to our longer lead time retail customers, but if we wanted to supply, fast moving internet retailers , we could only do that with stock that was left over.”
This need to prioritise was partly down to differing supply arrangements. Certain retailers would pre-order goods, and thus trigger the invoice finance facility. But online retailers tended to work on a rolling order system, replacing units as they were sold and making no longer-term advanced orders. In such cases, invoice finance wasn’t available.
An integrated package
Voyager-Systems approached Santander in 2012. “We could immediately see the limitations they faced,” says Relationship Director Philip Orrell. “The existing invoice finance facility wasn’t allowing them to pursue the opportunities in their market. Indeed, they were missing out on some of the higher-margin business. We felt that Santander could offer a solution that other banks had struggled to provide.”
That solution was an integrated package that included a £2.4 million invoice finance factoring facility, a £1.25 million trade finance solution, a £0.5 million term loan under the Enterprise Finance Guarantee, foreign exchange facilities, and BACS payments. The key to this package was the integration of trade finance and invoice finance, as Philip explains. “It provides funding all along the cashflow cycle, with invoice finance paying off money borrowed under the trade finance facility.”
Voyager-Systems impressed the Santander team, not only in terms of the company’s customer base and market share but also in its financial management. “For a small company they were very diligent on paperwork and finances,” says Santander Trade Finance Director Andrew Morton. “They ticked all the boxes for us.” The bank’s willingness to understand the ambitions of Voyager-Systems also impressed the company’s management. “I felt they really took time to understand us,” says Robert.
Since the deal was completed in August 2012, Voyager-Systems has undergone a noticeable rise in sales. “We’ve sold 1,000 units a week at peak times and we’re also selling to German internet resellers,” says Robert. The company has also used its new facilities to fund aggressive marketing for its new in-car camera, a system designed to help drivers with insurance claims following accidents. “We’ve been able to get it into the stores with high-quality video displays, backed by TV ads and PR.”
With new contracts to supply car companies Toyota, Lexus and Jaguar/Land Rover, and a new deal with Waitrose, all now on-stream, Voyager-Systems is a company clearly steering towards further growth. “I don’t think this would have happened with a more traditional bank,” says Robert.
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Relationship Director Comments
We had great faith in this company. They had a great track record and we could see that they were very much in control of their finances.