Defense Products & Services Group USA
Engineering success takes more than know-how
After many years working as a military engineer in the US, Ken Fincher came up with an idea that he knew might be successful not only as a business venture, but also as a way to save lives on the battlefield.
Ken’s revolutionary tow bar system—designed to help move tanks, personnel carriers or other large vehicles that break down or are damaged in combat—was half the weight and twice as strong as previous towing systems, and could be set up 50 times faster by 75% fewer people. This meant putting fewer people at risk and getting them out of danger much more quickly.
After working on the design for years, having molds made, speaking with the US and Canadian militaries and putting the product through field testing, the company started by Ken and his wife—Defense Products & Services Group USA (DPSG USA)—had secured a manufacturer and was ready to begin production. The problem? The manufacturer required 30% up front to build the product.
“Our process represented a genuine breakthrough in design and production that would save lives in combat. Tow bars typically take 24 weeks to make; we’ve got it down to roughly 16 to 18 weeks to build a multi-piece tow bar whose individual sections can be lifted by one person. We needed to get this product in the hands of the military, but the small business loan we were trying to acquire fell through. That’s when our loan broker introduced us to Liquid Capital.”
~ Ken Fincher, President, Defense Product Services Group USA Inc.
With factoring, working capital issues don’t limit success
Initially, DPSG USA took out several high interest loans to finance upfront product development costs, but once multiple contracts were in place, that approach didn’t make fiscal sense. When DPSG USA’s other loan options proved a dead end, Liquid Capital was able to provide a $55,000 merchant cash advance to settle some immediate financial requirements (a deal that went beyond Liquid Capital’s usual support process), then a traditional A/R factoring solution that could provide the longer-term assistance DPSG USA needed.
Currently, DPSG USA’s product manufacturer is based in Canada, and its major sales contract is for $5 million with the Canadian military. The military’s payment terms are 30 to 45 days, but DPSG USA needs to place its manufacturing orders 30 days in advance due the time it takes to make the product. There are also penalties for not delivering to the military on time—not to mention the risk of losing future business.
By factoring its receivables with Liquid Capital, DPSG USA has access to a $2 million credit facility on which it withdraws approximately $880,000 per month to pay any advance operating costs, and Liquid Capital doesn’t require payment until the receivables are paid by DPSG USA’s client. This fills DPSG USA’s financing gap perfectly, cash-flow is stabilized and it doesn’t require high-interest loans to keep the production/sales process moving smoothly.
“Liquid Capital has top-notch customer service. They’re not only helpful and offer great advice, they’re also highly patient as they understand the unexpected nature of contracts. This is the first time we’ve been involved in a factoring relationship, but our experience has been an excellent one. We’re really pleased with the level of professionalism we’ve received.”
~ Ken Fincher, President, Defense Product Services Group USA Inc.
Reaping both expected and unanticipated benefits
On top of the core benefits factoring delivers around cash flow and working capital, DPSG USA has realized some less anticipated advantages. Prior to working with Liquid Capital, DPSG USA—a US-based company—had to convert the money it was paid by the Canadian Department of National Defence (DND) from Canadian to US dollars in order to run it through its bank, then back to Canadian dollars to pay its manufacturing contractor. With Liquid Capital involved, payments are received from the DND and made to the contractor directly, within Canada, allowing DPSG USA to totally eliminate the payment of significant transfer fees.
“It was a big help that Liquid Capital had a relationship with both the Canadian and US governments, as well as experience doing military contracts. That was a huge credibility factor and sales point for us. When I told Liquid Capital that the Canadian government expected us to be paid in a certain way, they were easily able to accommodate those needs.”
~ Ken Fincher, President, Defense Product Services Group USA Inc.
Future prospects look strong with factoring support
DPSG USA is looking forward to expanding its military contracts in Canada, the US and internationally. Already, three more contracts for the Canadian military are in the offing, and the fact that DPSG USA can count on Liquid Capital to help fund upfront costs is a huge boon to its confidence.
For their part, Liquid Capital understands that DPSG USA will eventually qualify for a traditional banking relationship, but they understand that this evolution is part of the nature of the alternative financing environment. After all, the ultimate aim is to enable companies to move on because Liquid Capital has helped put them on the road to success.
“With financing, it’s important to shop around, do your research and make sure you understand the product. The solution must be transparent and deliver on its promise, and we honestly didn’t see anything that was as easy to understand as what Liquid Capital offered. There’s so much confusing—sometimes misleading—information out there; when you come across a company that’s telling the truth with no hidden items, it’s such a big help. It really gave us a comfort level we didn’t have with other providers.”
~ Ken Fincher, President, Defense Product Services Group USA Inc.
