The business is fast-growing and currently turns over £9 million a year. The sales model draws heavily on direct marketing, through catalogues and email newsletters, and this route has proved extremely successful. However, this success has actually proved a hindrance to the founders in terms of banking. The business had successfully negotiated finance in the past, but the short-term negative impact of profitability caused by investing in headcount and sales and marketing led to it being refused advances by other banks.
“Santander looked under the bonnet probably more than my auditors have ever done. By the time the deal closed they understood intimately the drivers and the needs of our business.” Geoff van Sonsbeeck, Co-Founder, Isabella Oliver
“There is a negative implication for profitability in fast-growing businesses because they have to invest to sustain that growth, by hiring people and developing systems,” explains David French, Santander Relationship Director.
“You have a situation where people want to borrow money but they will spend that money on something that will deflate profits in the short term. If you take the traditional banking view – which doesn’t like liabilities of this kind – it’s a challenge.”
Investing to compete
For the team at Isabella Oliver, this was a big problem. They wanted to expand the business to compete at the very highest level in their sector, which meant hiring top people, developing the wholesale and non-maternity segments of the business and increasing its acquisition activities. “With maternity wear you’re always on a first date,” says co-founder Geoff van Sonsbeeck who, along with his wife, gave up a corporate career to start the business ten years ago. “You have to constantly acquire new customers because they are only interested for a few weeks at a time.
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Isabella Oliver's Co Founder, Geoff van Sonsbeeck
“This is why we have built a really incredible database of customers who love the brand and trust the online marketplace. We launched the new non-maternity brand to support this demand and it has grown unbelievably quickly.”
High overheads inevitably led to cashflow constraints. The business needed to invest heavily in acquisition marketing to grow its customer base, but it would not see a return on that investment for between six and nine months. Geoff concluded that the business had outgrown its incumbent bank and began the search for a new partner that would furnish his ambitions for growth. He was introduced to Santander and ten months of collaboration ensued before a deal was struck. “You always keep an eye on banks because they are important stakeholders, so we often meet and greet them. In this specific case the connection was made through the Prelude networking group,” says Geoff.
“Santander looked under the bonnet probably more than my auditors have ever done. By the time the deal closed they understood intimately the drivers and the needs of our business,” says Geoff.
Structuring finance
“It’s fascinating to see that entrepreneurship is a genuine objective of Santander and not just words.” Geoff van Sonsbeeck, Co-Founder, Isabella Oliver
The financing package comprised a £700,000 growth capital loan and a further £700,000 split between trade finance, invoice finance, a revolving credit facility and a £75,000 overdraft. The company found invoice finance to be particularly useful.
“Last year we didn’t do wholesale at all but this year we did £2.5 million,” says Geoff. “That changes the dynamics of working capital because it goes in peaks. Typically, you have to work to 30, 60 or 90-day payment structures, so under the wrong financing structure I would have had to say no to it.”
Since deal closed, Isabella Oliver has recruited 11 new staff and will hire around 15 more in the short term, which will take the total headcount to 90. There has been further investment in technology and warehousing to support the back end of the web-based business, as well as further investment in acquisition marketing.
Long-term Partnership
“In terms of going the extra mile, this is exactly where Santander stands out,” says Geoff. “In the ten months leading up to the deal, they met with all the key suppliers, learned all the drivers and compared them to rival businesses.
“They completely understand the space and our position in the space, as well as what will benefit us in the short and long-term. When we signed off on the business case it was a joint business case.
“It’s fascinating to see that entrepreneurship is a genuine objective of Santander and not just words.”
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