Randco Tool & Die

Problem:

A small family-owned tool and die manufacturer in western Pennsylvania with constricted cash flow is unable to secure a commercial loan from local banks that would allow for future growth plans.

Solution:

Recognizing the company's solid business history and growth potential, First International Bank provided a long-term commercial loan guaranteed by the U. S. Small Business Administration, allowing the 15-year old company to reduce monthly debt service requirements and expand revenues.

Loan Puts Manufacturer Back on Track

MEADVILLE, PA - What happened to Joseph Randazzo's company could happen to any business looking to expand revenues and increase employees in a capital-intensive industry.

Randco Tool & Die is a family-owned precision tool and die manufacturer based in Meadville, Pennsylvania that has developed a niche in the electronics industry by producing connector injection molds and ultra-close tolerance components used in computers, televisions, cell phones and other electronic equipment. It's a labor-intensive business which requires state-of-the-art tool and die machinery.

As CEO of Randco Tool & Die, Joseph Randazzo wanted to grow his business by increasing employment, investing in the right mix of machinery and equipment, and remaining current with his vendors. This business strategy made sense, but with typical conventional financing the company would be faced with excessive monthly cash obligations and Randazzo's ability to grow the business was hindered. In addition, local banks concentrated on the past performance of Randco which, like many manufacturers, had experienced downturns in its business cycle. The combination of the company's history and limited conventional financing created a frustrating scenario for Randazzo.

Although Randco's business continued to grow throughout the ordeal, Randazzo's appeals for financing were turned down by a number of local lending institutions. "Other banks couldn't get past certain down periods in our history, or provide a financing structure that would facilitate the company's future growth plans," notes Randazzo.

Finally a friend in the tool and die business suggested that Randazzo approach First International Bank, which had recently opened a representative office in Pittsburgh. Building upon its success in the Northeast, First International Bank was a fresh financing source for small and medium size manufacturers in western Pennsylvania.

Randazzo contacted Matthew Roach, senior vice president and head of First International Bank's office in Pittsburgh. "When I met with Matt, I was a little skeptical because I had already been turned down by so many banks in the area," says Randazzo. "Matt was the first person to give me hope. By taking the time to thoroughly review our business, First International Bank saw that Randco was a solid, growing business with an excellent credit history, rising revenues and had the potential for long-term growth."

According to Roach, First International Bank recognized that Randco's future success was being hindered by growing pains and a lack of cash flow and working capital. "As their new business partner, First International Bank was pleased to provide the financing resources Randco needs to continue on its expansion path," adds Roach.

First International Bank provided a $260,000 commercial term loan which was backed by a U. S. Small Business Administration guarantee. This credit enhancement extended the term of the loan to 11.5 years. (The typical equipment loan matures in five years.) "The loan's longer maturity reduced my monthly cash obligations by half and really improved my working capital," notes Randazzo, who was able to hire two additional employees and purchase two new surface grinders, one milling machine and two Ram-type EDM (Electrical Discharge Machining) machines for his growing business.

The financing has enabled the company to build additional revenues by increasing production capacity and increasing sales volume. Randco's projected revenues for fiscal year 1998 are $1.3 million, a 58 percent increase over 1997 revenues.

Within the next five years, Randco plans to double its size, buy its own manufacturing facility, and diversify into areas beyond the electronics industry, such as the medical field. The company also plans to expand its production processes with the inclusion of Wire EDM and EDM Hole Drilling equipment. These state-of-the-art technologies penetrate areas in injection molds that cannot be machined by traditional surface grinding and milling.

"Because First International Bank had faith in our business, Randco is back on track and poised for a bright and profitable future," says Randazzo. "The bank looked at our business through open eyes and really cared about our success. Throughout the process, we received the kind of personal attention you wouldn't expect from a large bank. I can't thank Matt Roach and First International Bank enough for helping to turn our business around."