Key takeaways
- According to Vice President and Treasurer Mark Scheiwer, the Scotts Miracle-Gro Company (ScottsMiracle-Gro) faced higher debt levels and elevated cash flows after COVID-19
- ScottsMiracle-Gro found a tailored accounts receivable solution that would increase its advance rate and improve liquidity
- Scheiwer shared that after adopting the solution, ScottsMiracle-Gro saved an estimated $3-4 million in annual costs from improved pricing rates
About
Having strong working capital is essential, especially for companies that experience seasonal demand. ScottsMiracle-Gro, a lawn and gardening supply manufacturer, found a tailored accounts receivable solution to meet its working capital needs.
The challenge
Scheiwer explained that emerging from COVID-19, ScottsMiracle-Gro faced higher debt levels, excess inventory and elevated working capital levels. The company sought a new accounts receivable solution to meet its funding needs. Its existing accounts receivable facility had run its course and was not fully leveraging their customer accounts receivable capacity.1
With a long history of banking with J.P. Morgan Payments, ScottsMiracle-Gro reached out to find a more adequate funding mechanism offered through J.P. Morgan Payments. The bank worked with ScottsMiracle-Gro to identify an upgraded trade and working capital solution. “We wanted to elevate our working capital to better deliver for our customers and were looking for a new way to improve our business, funding sources and cost management,” says Scheiwer.
The solution
With the new accounts receivable facility, ScottsMiracle-Gro can sell up to $600 million in eligible receivables to J.P. Morgan Payments.2 The Assistant Treasurer at ScottsMiracle-Gro, Brian Gorka, shared that under its previous solution, the company had only a $400 million cap to work with.
Now, with its increased funding potential, ScottsMiracle-Gro has added another big box store to its customer portfolio, which already has a number of other prominent suppliers.
“This accounts receivable facility is a terrific working capital tool that has really helped us manage the overall liquidity of the company,” says Gorka.
Gorka broke down the benefits: Through true sales, J.P. Morgan Payments acquires full ownership of the receivables. ScottsMiracle-Gro continues to collect payments from those customers and, in turn, remits collections to J.P. Morgan Payments on the sold accounts receivable (AR).3 Scheiwer shared that, as a result, ScottsMiracle-Gro saves $3-4 million annually because the receivables are off the balance sheet.
The company had also been burdened by elevated pricing rates from its previous traditional asset-backed debt facility. Using the new facility, it took advantage of the high credit profiles of its “big four” customers and received a savings of 90-100 basis points.3 The new AR financing facility provides a 100% advance rate, which Scheiwer explains is a significant improvement over the previous rate of 80% that ScottsMiracle-Gro had been working with under the former accounts receivable facility.
“This accounts receivable facility is a terrific working capital tool that has really helped us manage the overall liquidity of the company.”
Brian Gorka
Director, Assistant Treasurer ScottsMiracle-Gro
The results
Gorka noted that the company has improved liquidity to meet peak demand and has developed a more cost-efficient, streamlined process for managing cash flow. Since adopting the new facility in November 2023, ScottsMiracle-Gro has already exceeded the level of dollar usage its old solution supported, and it looks forward to managing peak-season cash flow with its streamlined processes.
To learn more, visit our Accounts Receivable Finance page.
References
ScottsMiracle-Gro reports second quarter results. (2023). ScottsMiracle-Gro
$600 million receivables, true sale. (2024). Quantisnow
© 2024 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A. Member FDIC. Deposits held in non-U.S. branches are not FDIC insured. Non-deposit products are not FDIC insured. The statements herein are confidential and proprietary and not intended to be legally binding. Not all products and services are available in all geographical areas.
Visit jpmorgan.com/paymentsdisclosure for further disclosures and disclaimers related to this content.
