After a successful initial pilot during which Eco Building Products provided treated lumber to 10 Home Depot stores, the retailer now plans to expand the deal to include 104 stores. To meet the demand, the vendor obtained $3.4 million in funding to support the increase in product demand.
Treated wood provider Eco Building Products Inc. has entered into definitive agreements for up to $3.4 million in financing to support filling a purchase-order backlog from an undisclosed “major big box customer.” Though not mentioned specifically, the company’s funding announcement all but acknowledges Home Depot as that customer.
Eco Building plans to use the funding to increase production capacity at its manufacturing facilities stemming from a growing demand for Eco Red Shield-treated lumber for Home Depot following a successful expanded commercial launch of the product.
“This funding represents a transformational milestone for the company from a revenue-growth and sales-trajectory standpoint,” Steven Conboy, Eco Building Products president and CEO, said in the funding release. “We now have the capital needed to meet a recent dramatic increase in demand for Eco Red Shield” from Home Depot to address “unmet needs in the $60 billion North American lumber industry.”
In February 2014, the company expanded its distribution channels in a second pilot involving 104 Home Depot stores from an original initial pilot involving 10 stores in November 2013. The significant increase in orders for Eco Red Shield prompted the company to consider strategic options to fuel an expected rapid growth in demand for the lumber, according to the funding announcement.
Under the terms of the agreements, Eco Building Products will receive up to $1.4 million in capital in equal installments of $350,000 over the next four months to support the filling of backlogged orders and to meet increasing demand for the lumber. The company’s goal is to reach sales of $1.5 million in the fourth month, potentially putting it in a cash flow positive position, the company said.
Eco Building Products concurrently received equity financing of $800,000 in two tranches to support the expansion in production capacity at its core manufacturing facilities. The initiative would expand the production capacity to $2 million per month from $750,000 and retire approximately $300,000 in convertible debt financing, the company said.
The vendor also will enter into an expandable revolving credit facility agreement for $1.2 million to support its supply chain, which will allow it to increase its marketing efforts and demonstrate long-term sustainability to the “big box customer,” Eco Building Products said.
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