West Oregon Wood Products Inc.

For the past 24 years, West Oregon Wood Products has been meeting the increased demand that has stemmed from a global eye on contributing to a greener world and has established the company as a leading US manufacturer of all-natural wood pellets. These cost efficient wood fuel pellets are used for heat and power and have considerable environmental and economic benefits. They are primarily produced from waste such as sawdust and wood shavings, are then compressed under high pressure and turned into pellets without the use of plastics or other additives. The company also manufactures all natural fire logs and animal bedding for residential and commercial use. It’s high quality all natural products are sold by national retailers such as Home Depot, Bi-Mart and Tractor Supply Company.

Liquidity Challenges of a Seasonal Business

As West Oregon Wood’s Controller, Shawn Hindrum’s job is to secure the most competitive sources of capital in order to help the company take advantage of continued growth opportunities. Fortunately, they have been able to double production output by operating a second plant. “It’s always a difficult decision for a seasonal firm to commit to the cost of an expansion, due to the cash flow constriction it creates,” comments Mr. Hindrum. “But, we were determined to meet demand and lead this industry in the U.S., and expansion was the only way to fulfill on that commitment.”

Outsiders often presume that a growing business is a business without challenges. However, as Mr. Hindrum puts it: “When the business is growing, cash flow planning is even more critical. Even with government incentive, such as tax benefits allotted to our renewable energy company, and the high demand for our product, managing cash flow and growth without overextending was a challenge. We wanted to make sure we were as smart as possible about managing our cash flow,” he added.

Prior Financing Constraints Putting the Brakes on Growth

West Oregon Wood Products financed their working capital needs through a traditional line of credit they were able to draw upon for routine operating expenses. But, with even greater growth continuing, they reached their limit, threatening their ability to take advantage of growth opportunities. “We were growing fast and yet still in a cash bind; we needed to improve our working capital to run our daily operations and manage our bills in the off-season,” he added.

After using a term loan to pay down their line, they looked into obtaining an SBA Loan, but found the process cumbersome and the loan itself too restrictive. They tried inventory financing with a repurchase agreement “but the drawbacks of the inventory financing have been extremely high interest rates and significant inventory restrictions. We needed to find a more affordable way to access cash,” he continued.

TRE Discovery – A ‘Better Way to Finance Growth’

The business had sufficient accounts receivable volumes from high quality Account Debtors so AR financing seemed a perfect place to turn to improve its cash flow position. They joined The Receivables Exchange in March 2009 and immediately realized the value of being able to sell their receivables to gain quick access to cash on terms they get to control. “We needed a way to increase our working capital during the off-season and were in the process of looking for alternative financing options,” he remarked. “I was amazed at how quickly and easily we were able to obtain competitively-priced funding – we received our funds the very next day after the auction closed.” The Exchange has provided West Oregon Wood Products the control and flexibility to sell only the receivables they want and only when it makes sense for them, which has allowed them to grow on their terms.

A Cash Flow Solution That Works

Some common cash flow strategies among seasonal businesses are to push out payables or offer deep discounts to customers who pay early. The Receivables Exchange provides these businesses with additional monetary flexibility. “We have been able to leverage the receivables of our large Fortune 500 customers that pre-buy their product before the start of peak season and fund day-to-day operations during the slower revenue periods. Now, we can reinvest that capital into the growth of the business and compensate for reduced AR in the off season,” he added. In just a short time, they have established a trading history that has enabled them to effectively lower their cost of capital. “Until we started using The Receivables Exchange, we were cash-strapped in the off-season. Now, not only are we able to improve our cash flow, but we are also able to maintain our credit rating even during times of slower revenue.”

Every day more companies across more industries are turning to The Receivables Exchange as means for short-term finance. The Exchange serves as an online capital marketplace for small and midsize companies in search of alternative ways to finance growth and optimize their working capital management. Learn how to become a Seller on the Exchange. Find out more about West Oregon Wood Products Inc.