Singing Machine Secures $2 Million Senior Credit Facility
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Insights
The announcement of Singing Machine's $2 million senior credit facility signifies a strategic move to bolster its working capital, which is a critical component for sustaining and accelerating business growth. The facility's purpose is to fund accounts receivable generated from ongoing sales, which is a common practice for companies looking to improve cash flow and manage the timing of income and expenses more effectively. The term of 2 years for the credit facility indicates a short-term financial strategy aimed at supporting immediate operational needs rather than long-term investments.
From a financial perspective, the absence of financial covenants and the claim of the facility being within prevailing market rates suggest that the company has secured favorable terms that could potentially enhance its financial flexibility without imposing restrictive conditions on its operations. This could be seen as a positive sign to investors, indicating that the company is managing its debt responsibly and has the confidence of its lenders.
Expanding the financing options for accounts receivable indicates that Singing Machine is actively seeking to deepen its relationships with domestic retail partners. By doing so, the company is potentially increasing its market penetration and ensuring a steadier cash flow from sales. The use of a hybrid approach, combining early pay programs with traditional credit facilities, suggests a strategic maneuvering to optimize working capital management. This could improve the company's ability to respond to market demands and invest in growth opportunities.
However, it is also important to monitor the company's reliance on such financing programs to ensure that it does not become overly dependent on external funding for its working capital needs. Excessive reliance on debt can lead to increased financial risk, particularly if there are shifts in market conditions or if the company's sales do not meet expectations.
The Singing Machine's approach to financing through an early pay platform with C2FO, coupled with the new Oxford credit facility, indicates a diversified approach to managing credit risk. By accelerating receivables from select retail partners, the company can potentially reduce the risk associated with delayed payments or defaults. The credit facility's lack of financial covenants could imply that the company is in a strong financial position, with Oxford Commercial Finance deeming them a low credit risk.
However, it is important for stakeholders to consider the implications of expanding working capital funding. While it can provide necessary liquidity, it also increases the company's debt obligations. Stakeholders should assess the company's ability to manage this additional debt, especially in the context of its historical financial performance and current market conditions.
Company Expands Non-Dilutive Working Capital Funding to Support Growth
Fort Lauderdale, FL, April 03, 2024 (GLOBE NEWSWIRE) -- The Singing Machine Company, Inc. (“Singing Machine”) (NASDAQ: MICS) – the worldwide leader in consumer karaoke products, today announced the closing of a
The Company has historically financed both accounts receivable and inventory working capital needs through a combination of working capital lines of credit with various senior lenders. The Company primarily relies on a financing program available through an early pay platform with C2FO to fund accounts receivable without any dollar limitations. This is an ongoing financing arrangement that the Singing Machine has maintained since 2009. This program specifically enables the Company to accelerate the majority of its receivables due from select domestic retail partners. The Oxford credit facility is intended to expand the financing on receivables that are not already approved for accelerated payments through the C2FO program.
“We’re pleased to close this line of credit with Oxford, which provides the Company with expanded options for funding receivables with more of our retail customers to support our working capital needs,” commented Gary Atkinson, CEO of the Singing Machine. “By utilizing a hybrid approach with the early pay program with C2FO and a traditional accounts receivable line of credit with Oxford, we have expanded our receivables financing to almost all of our domestic customers while still maintaining a lower cost, more flexible form of accounts receivable financing.”
“This facility is well within prevailing markets rates in terms of cost of capital and carries no financial covenants. We see this as one of the most flexible funding options available to us today, and we were pleased to complete the transaction with minimal cost during the process,” concluded Mr. Atkinson.
About The Singing Machine
The Singing Machine Company, Inc. is the worldwide leader in consumer karaoke products. Based in Fort Lauderdale, Florida, and founded over forty years ago, the Company designs and distributes the industry's widest assortment of at-home and in-car karaoke entertainment products. Their portfolio is marketed under both proprietary brands and popular licenses, including Carpool Karaoke and Sesame Street. Singing Machine products incorporate the latest technology and provide access to over 100,000 songs for streaming through its mobile app and select WiFi-capable products and is also developing the world’s first globally available, fully integrated in-car karaoke system. The Company also has a new philanthropic initiative, CARE-eoke by Singing Machine, to focus on the social impact of karaoke for children and adults of all ages who would benefit from singing. Their products are sold in over 25,000 locations worldwide, including Amazon, Costco, Sam’s Club, Target, and Walmart. To learn more, go to www.singingmachine.com.
Investor Relations Contact:
investors@singingmachine.com
www.singingmachine.com
www.singingmachine.com/investors
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