“I became really comfortable working with NFS and Dean Oliver almost immediately,” says Ed McKaughan, Lema Materials LLC, Owner, “Every time they said they would do something, they did it.”
SUMMARY
Lema Materials LLC has been active in the trucking services industry since 2004. The founders acknowledged that a great opportunity could be in the ownership of the materials it transported vs. hauling them. However, as a newcomer to the industry, Lema needed to learn the ins and outs of the industry to be competitive. After a difficult experience with the banks, NFS Leasing’s financing allows Lema to move easily into its niche and establish a strong new market presence.
Entry into a new industry meant that the initial purchase of many hard assets would rapidly utilize the company’s cash.
The expansion of a new state-of-the-art plant on a strict schedule necessitated the collaboration of Lema and NFS Leasing to meet the challenge.
THE CLIENT
In 2012, Lema Materials LLC identified the possibility of expanding its trucking activities to include material production and ownership as well. With limited exposure to the operations involved in material ownership, Lema began by concentrating on select fill, bank sand and common fill. Lema began to not only purchase material, but also excavate it themselves. Lema has now successfully moved from transportation to production, ownership and sale of the fill that was previously only trucking.
Six years later, Lema saw a window of opportunity to expand. This expansion included the production of concrete sand, gravel and other sand with fill. These added materials have a much higher demand and profit margin and presented an even bigger opportunity for Lema.
THE CHALLENGE
In 2018, Lema Materials LLC was introduced to a landowner who was seeking to convert a 108-acre plot of land into lakefront property for development. This would provide Lema with a large reserve of sand, gravel and various types of dirt for excavating and processing marketable products. Lema was motivated to accept the project and immediately knew it needed to acquire new equipment and a facility to support it.
Requiring quick action, the company approached a traditional bank and received a verbal commitment to finance the purchase. With this information in hand, the company moved forward and purchased $400,000 worth of equipment to begin preparing the site to receive and erect plant components. Returning to the bank for financing, the bank told Lema that they had made a mistake and could not finance the purchases. In debt of $400,000 and without plant financing, Lema had to find a solution quickly.
THE SOLUTION
As a newcomer to the industry and having seen its bank pull out of a crucial deal to support a major project, Lema found itself in a tough spot. Beaten, but determined and motivated, Lema started to seek alternative sources of funding. Integrity was an important requirement in finding the financial partner.
Fortunately, Lema was introduced to NFS Leasing, and quickly acknowledged that NFS was going to be the right partner to fund its equipment requirements. “I became really comfortable working with NFS and Dean Oliver almost immediately,” says Ed McKaughan, Lema Materials LLC, owner, “Every time they said they would do something, they did it.” This was a refreshing experience for Lema considering what it just went through with the bank.
EXECUTION
Consistent and transparent communication enabled Lema Materials and NFS Leasing to reach an agreement without delay. The partnership between the two companies would allow Lema to meet the timeline for the new facility and respond effectively to customer requests.
The new Lema Materials new facility is unparalleled in the industry, built with state-of-the-art equipment which includes computer-controlled product sort and distribution. The plant will allow a fast and efficient service and the product will be of constant quality. This will meet the demands of its many clients, including those clients with the requirements of the Texas Department of Transportation.
RESULTS
Entering into an equipment financing agreement with NFS Leasing meant finishing the project sooner than expected. McKaughan says of the deal “The process was so smooth that we had a three month decrease in timeline completion. Time is money. I wish we had engaged with NFS Leasing even sooner.”
The equipment at the new plant allows Lema Materials to produce a superior product that the rest of the industry simply cannot supply with outdated equipment. Lema now has enough product to efficiently respond to customer requests and expand its business.
