Having expanded significantly since its inception in 2012, FireBug – a manufacturer of pioneering firefighting equipment – found it needed additional finance to support its growing product line. Peter Kirkham, Director at ExWorks Capital, explains how ExWorks stepped in to provide a diverse, flexible funding solution to support the financial needs of this growing business.
Founded in 2012 by CEO Nick Link, FireBug manufactures innovative, environmentally-friendly firefighting equipment using its ground-breaking WaterMist technology.
Originally developed for potential decontamination use, mist technology harnesses pulse-water engineering to create a super-fine, low-pressure, water mist to extinguish fires. So while a typical fire engine will use on average 1,000 litres of water to extinguish a fire, FireBug’s product can achieve the same result with just 40 litres, making it 63% more efficient.
But FireBug’s innovation doesn’t stop there. One practical efficiency of Firebug’s WaterMist technology is the potential for smaller fire vehicles than the traditional large engines. So it made sense that FireBug’s next step was to develop its own range of vehicles – ranging from fourwheel drives to six-wheel sprinters – enabling the quicker deployment of fire-safety personnel and requiring fewer staff to operate.
Not unexpectedly when considering constraints on public spending across much of the developed world, these vehicles are proving very popular.
Yet the opportunities go beyond the developed world. Offering high-level firefighting facilities in smaller, more affordable vehicles provides a much more financially-sustainable option for countries with water shortages or where the infrastructure to support the production of large, costly fire engines is lacking.
FireBug has seen interest from Africa, Asia and the Middle East. So much interest, in fact, that alongside its British production unit, FireBug has opened an additional facility in Dubai, which serves its Middle Eastern and Asian customer base.
FireBug has already supplied fire safety vehicles to the Burj Khalifa (the world’s tallest building) and Dubai Airport, and has seen increasing orders from Nigeria, Qatar and India.
The need for finance
Such rapid growth requires strong financial support that goes beyond the capacity of existing investors. Going from manufacturing nozzles – which have a quick cash-flow cycle and are fairly cheap to produce – to building entire vehicles of which the nozzle is only a very small component, is a significant jump. Production of a vehicle can take up to nine months and – since a client only pays the full invoice upon receipt of the product (and with a growing number of orders in the pipeline) – such a gap needs financing.
Additionally, considerable financial support is required for the development of a fairly niche new product without a long-standing track record. And financing destined for developing economies such as India and Nigeria increases its risk profile, thus ruling out banks and larger lenders unable to finance such projects due to regulatory constraints.
So when FireBug first approached ExWorks Capital, it was after a long and arduous struggle to find a lender willing to take the time to understand the product and company and take a calculated risk based on its innovation and sales success.
Our first step was to undertake a thorough due diligence investigation through our sister company, RedRidge Diligence Services. This allowed us to evaluate all aspects of the business, including looking beyond FireBug’s existing balance sheet.
ExWorks ended up providing FireBug with two different products. The first: a revolving £1 million (US$1.3 million) credit facility that provides working capital to manufacture the product, and can be renewed on a yearly basis.
In addition, we financed a £300,000 term loan to be paid in two parts, and which FireBug began amortising at the end of its first profitable quarter. This additional financing saved FireBug from any potential dilution of its equity – a major benefit to a company rapidly increasing its potential share value.
ExWorks has developed a strong partnership with FireBug that we hope to continue into the future. Through co-operation and mutual understanding, we have established a deep appreciation of FireBug’s business model and have been able to fund a product that is both innovative and environmentally friendly.