Highview Industries Ltd, the customer's chair: What do you do with the step-up?

// DRILLS / ISSUE 04 / HIGHVIEW · CUSTOMER

ISSUE 04 · 2026-09-05 · 5 MIN READ

// ONE FILE, THREE CHAIRS

// THE LENDING CHAIR · ISSUE 04

Highview Industries

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// THE MD'S CHAIR

The Clean Yes

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// THE CUSTOMER'S CHAIR

Your Supplier's Revolver

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Your Supplier's Revolver

HIGHVIEW, FROM THE CUSTOMER'S CHAIR

MANUFACTURING · THE CUSTOMER'S CHAIR · DIFFICULTY 3/5

// THE SETUP

You run supply for a dairy-equipment OEM. Three years ago you signed Highview Industries to a three-year agreement with CPI-linked pricing for precision components, and they have delivered: on time, on spec, and at a volume that has taken their revenue from NZ$28m to NZ$38m. Most of that growth is you. Next quarter the agreement steps up in volume, as it was always going to, and the purchase orders are on your desk to release.

Highview's MD mentioned, in the ordinary way suppliers mention such things, that the company has asked its bank to lift the working capital line from NZ$2.5m to NZ$4.0m to carry the receivables and stock the step-up brings, and that the answer is expected inside two weeks. He was not asking for anything. Your terms with Highview are your standard 45 days; their debtor days across all customers sit at 44. The capacity expansion behind the growth was funded separately, and it is real: you have walked the floor.

Your finance team's supplier-risk review flags one line: a key supplier whose growth depends on bank funding that has not yet been approved. The review recommends "a proportionate response." The purchase orders are due out Friday.

Your supplier is borrowing to serve you, and its bank has not answered yet. What do you do with the step-up?

// FY25 SNAPSHOT

SOURCE: SUPPLIER REVIEW · HIGHVIEW FY25 · COMPOSITE CASE — FICTIONAL

REVENUE

NZ$38m

▲ +36% (2yr)

EBITDA MARGIN

12.4%

▲ +80 bps

OCF

NZ$2.1m

▲ growing with revenue

DSO

44 days

▲ +2 days

CONTRACTED FY26

78%

▲ 3-yr agreements

A manufacturer's working capital cycle runs about 66 days at Highview's numbers. Every day you take off your own payment terms is a day its bank does not have to fund.

// YOUR JUDGMENT

What do you do with the step-up?

[A]Sign the step-up as scheduled — their funding is their business, and the agreement already says what happens if they miss[B]Sign, and shorten your own payment terms on the step-up volume — your invoices are the cheapest working capital your supplier will ever get[C]Hold the step-up until the supplier's bank has confirmed the increase in writing[D]Dual-source a third of the step-up volume now, so a funding problem at Highview never becomes a line-down at your plant

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// THE READING

Read Highview's file the way its bank is reading it, and one line is yours. The working capital a manufacturer needs is its cycle applied to its revenue: debtor days, inventory days, less the days its suppliers give it. Highview's debtor days are 44, and a large share of those days is the 45 you set. The revolver its bank is being asked to lift exists, in part, to carry your invoices between delivery and payment. A supplier that borrows to serve you has a bank inside your supply chain, whether you invited it or not, and the cheapest working capital that supplier will ever get is the days you choose not to take.

Why not A: the agreement does say what happens if they miss, and none of it gets you components. A step-up released on standard terms against funding that is still in process is a bet that the bank says yes, placed with your production line as the stake. The likely outcome is fine; the file is clean and the bank will probably fund it fast. The unlikely outcome is a supplier stretching to serve a customer that could have made the stretch smaller for nothing.

Why not C or D: C holds the step-up until the bank confirms, which creates precisely the shortfall you are guarding against, in a supplier whose forecast the bank is reading; a customer who delays orders is a line in that file too. D dual-sources a supplier that is performing, punishing the growth you contracted for and paying a second supplier's learning curve to do it.

Which is why the senior banker's advice, in the customer's chair, is B. Release the step-up, and shorten your own terms on the step-up volume: 30 days rather than 45 for the next two quarters, or a prompt-payment discount priced at less than Highview's bank charges it. Fifteen days on your share of NZ$38m of revenue is real money to a revolver, and it costs you a little float on a supplier you have already decided to grow with. It also puts something on Highview's file that its bank will read before anything else: the customer the growth depends on is shortening the cycle, not lengthening it.

Your invoice terms are part of your supplier's revolver. When its bank is deciding whether to fund your growth, the cheapest yes is the days you give back.

// THE SAME FILE, FROM THE OTHER CHAIRS

Three people read this file in the same week. The lender's reading is the one the other two are reacting to.

// THE LENDING CHAIR · ISSUE 04

Highview Industries

Same request as Issue 01 on the surface. A completely different file underneath.

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// THE MD'S CHAIR

The Clean Yes

No borrowing base, no monthly pack, no conditions. The bank read your file with judgment. What does a borrower do with that?

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// HOW READERS ANSWER

The senior banker's read is [B].

[A] · 41%

[B] · 27%

[C] · 20%

[D] · 12%

The tempting answer is A. The senior banker chose B. The reading explains why a supplier that borrows to serve you has just put its bank in your supply chain, and what your payment terms can do about it.

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