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Distribution Centre Project Funding

CASE STUDY: Distribution Centre Project Funding

Key Finance recently worked with a leading UK wholesale food and distribution retail business after it purchased an outdated distribution centre that required a refit and refurbishment.

An extra complication was that the distribution centre consisted of two sites, with funding required for almost everything inside and attached to the buildings, including, but not limited to, the ceilings, stairs, wiring, shelving, racking and IT equipment.

In total, £2.37 million funding was required of which £1.16 million was for soft costs, which is where a slightly different approach was required. The high proportion of soft costs – at almost 50% of the total funding – was a concern for a large number of traditional funding sources and created a roadblock for the client.

The Solution

The Project-Based Lending (PBL) model offered by Key Finance funded 100% of the project, including all of the soft costs that other funders were unable or unwilling to cover.

Key looked at funding the fit-out of the two facilities together, and in doing so was able to write down 100% of the deal – the solution essentially split the transaction across one finance lease and one loan, which together encompassed the entirety of the funding required.

This also provided vital working capital to the client, something was simply not possible from all other funding avenues that it had explored while researching the project.

“Key were smooth and efficient and were able to control the run in to our year end,” said the client’s Group Finance Director. “The whole project was funded without drama and has contributed to one of our biggest years to date.”

Key Finance is also able to work with distribution & logistics industry suppliers through its Vendor Programme, which has been designed to help them offer quick and easy finance to their clients.

“The distribution and logistics industry is facing numerous challenges in today’s economic and political climate, but the roll-out of our PBL tool means that the ability to fund expansions and improvements should not be one of them,” said Key Finance Managing Director Henry Mounsey.

“We’re incredibly proud of the reputation our family-run business has earned and we welcome the opportunity to work with new clients of any size in the supply chain sector.”