Material Production:

Lema Materials LLC

Deal Size:

$2,360,035

Equipment:

Welders & Manufacturing Equipment

Industry:

Material Production & Trucking

“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
Previously operating in the trucking services business since 2004, the founders of Lema Materials LLC recognized the real opportunity was in the ownership of the materials it had been transporting vs. the hauling of them. However, as an industry newcomer, Lema had to learn the ins and outs of the industry in order to compete. After a difficult experience with banks, financing from NFS Leasing enabled Lema to transition into their niche and establish a strong new presence in their market.

  • Entering a new industry meant the initial purchase of many hard assets would quickly use the company’s cash.
  • Expansion of a new state-of-the-art plant on a strict timeline required both Lema and NFS Leasing to work together to meet the challenge


THE CLIENT

In 2012, Lema Materials LLC spotted the opportunity to expand its trucking business to also include material production and ownership. Having limited exposure to the operations involved in owning the materials, Lema started out initially with a material focus of select fill, bank sand and common fill. Lema began to not only purchase material, but also excavating it themselves. Lema has now transitioned successfully from transporting to producing, owning and selling the fill it was previously only trucking.

Fast forwarding six years, Lema saw an opportunity to expand further. This expansion included material production of concrete sand, gravel and other sands along with fill. These supplementary materials have a much higher demand and profit margin and presented an even greater opportunity for Lema.

THE CHALLENGE
In 2018 Lema Materials LLC was introduced to a landowner who was looking to repurpose a 108-acre tract of land to lakefront property for development. In doing so, there would be a large reserve of sand, gravel, and various types of dirt for Lema to excavate and process into marketable products. Lema was motivated to accept the project and immediately knew it needed to acquire new equipment and a facility to support it.

Needing to act quickly, the company approached a traditional bank and received a verbal commitment to fund the important purchases. With this information in hand, the company went ahead and procured $400K of equipment to commence site preparation to receive and erect the plant components. Upon returning to the bank to receive funding, the bank told Lema that they had made a mistake and could not fund the purchases. Left with $400K in debt and no plant funding, Lema needed to find a solution quickly.

THE SOLUTION
As the new guys in the industry and having its bank withdraw from a critical agreement to support an important project, Lema found itself in a difficult situation. Beaten up, but determined and motivated, Lema began looking for alternative sources of funding. Integrity was an important requirement in the search for a finance partnership.

Fortunately, Lema was introduced to NFS Leasing, and quickly recognized that NFS was going to be the right partner to finance its equipment needs. “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 allowed Lema Materials and NFS Leasing to come to an agreement quickly. The partnership between the two would mean Lema could keep to its desired timeline for the new facility and efficiently meet customer demands.

The new Lema Materials facility is unprecedented in the industry, built using state-of-the-art equipment which includes computer-controlled product sort and distribution. Not only will it be quick and efficient, but the product will have consistent quality, meeting the demands of its many clients, including those who must meet the requirements of the Texas Department of Transportation.

RESULTS
Completing the equipment financing agreement with NFS Leasing meant finishing the facility sooner than anticipated. 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 in the new facility allows Lema Materials to produce a premium product that much of the rest of the industry simply cannot provide with older, outdated equipment. Lema now has sufficient product to meet customer demands efficiently and grow and expand its business.

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