Social distancing and working from home have sparked increased demand for bicycles of all kinds, which is good news for San Diego-based Phantom Bikes. But the popular maker of electric-powered bikes needed cash flow to keep up with orders for new products.
With gyms closed, families cooped up in close quarters and work commutes reduced to the walk from the bed to the couch, Americans have turned to alternative forms of mobility as the coronavirus pandemic stretches on.
The demand for bicycles in the first half of 2020 led to nationwide sales, equipment, and repair services nearly doubling compared with the same period last year, according to the N.P.D. Group, a market research company.
Bikes were hard to come by, which was evident through the bare bicycle aisles of mass retailers, sold-out independent bike shops and long wait-times at repair shops.
This boom in bicycle sales and a staggering increase in ridership during the coronavirus pandemic placed San Diego-based Phantom Bikes in a plum position to capitalize on an opportunity to sell its upscale, vintage-inspired electric bikes.
Despite the increased demand, Phantom Bikes CEO and President David Toma found himself in a situation familiar to other small businesses at the time: struggling to secure traditional funding from banks during an economic crisis.
A former Hollywood producer, Toma has worked both as an independent producer, and as a producer for big-name film studios and distributors.
The Great Recession hit Toma’s business hard, ”Like a brick wall,” and he decided to leave Hollywood for San Diego in 2014 to pursue a new opportunity. Although that venture folded a year later, Toma found his true calling working in marketing for a company that was building retro bikes with gas motors.
“These bikes were just beautifully designed, but it was a small company. I felt that it could be much bigger than what it was, so I set about trying to create an opportunity for the company to expand its market base, believing in the fact that Phantom Bikes is a lifestyle brand,” Toma said.
Toma bought the company in April 2019, changing the premise from gas-powered to electric bicycles because he felt that was where the industry was headed. He also facilitated a co-branding deal with American apparel brand Von Dutch, creating even more demand for the eco-friendly, luxury bikes.
In June 2019, Phantom Bikes started selling its products at Costco, one of several large retailers that Toma’s company counts as a client. Toma was grateful for the opportunity to work with the influential brand, and within five weeks of launching, Phantom BIkes blew out of its inventory with the mass retailer.
However, as a small company, the sudden revenue growth also meant growing pains for Phantom Bikes.
In December 2019 — even before the pandemic reared its ugly head — Phantom Bikes struggled to find financing to buy inventory and fulfill a $400,000 purchase order for Costco.
To meet the demand for more products, Phantom Bikes turned to factoring.
“We just couldn’t finance it in a traditional sense and it forced us to go looking for hard money from a private lender. It was devastating. We’ve been in business since 2009, but the banks didn’t care,” Toma said. “My interest rate was extremely high, but in order to satisfy the demand for Costco, we went ahead and did the deal.”
Toma bought the inventory with the money he was able to get from the private lender that same month, but the shipment arrived too late to meet fourth-quarter benchmarks. Still, Phantom Bikes launched again with fresh inventory on Dec. 10 and immediately started selling bikes.
Aided by the acceleration of e-commerce, digital sales and the deal with Costco, Phantom Bikes’ sales soared 500% from January to April, selling five bikes a day and four times that on weekends.
Revving up production
By April 21, Toma was out of inventory. It was then that he turned to C2FO for help with the cash gap.
Toma reached out to C2FO on April 21 in order to accelerate more than $110,000 in receivables through Costco’s early payment program. Toma needed the money to finally pay off the factoring company he used months before, as the interest rate was killing his bottom line.
Within days, Toma had the capital he needed to speed up production and create more inventory to meet demand.
“The platform is easy to use, it’s easy to manage and the people are fantastic. I would not have been able to achieve this level of success without (C2FO’s) supplier relationship managers. They were fantastic individuals,” Toma said.
“C2FO gave us the opportunity through Costco to access payments on our invoices earlier than we would normally,” Toma continued. “We didn’t have to wait 60 or 90 days to get paid. That was fantastic for us.”
Toma believes the pandemic marks a significant departure in retail and transportation trends, and a lasting shift in commuting in American cities as US citizens embrace cycling over cars, cabs and public transit.
As travel and commuting habits change, Toma believes the demand for his products “won’t slow down.”
“(Consumers) will buy bicycles online,” Toma said. “They’re not going to be going to the mom and pop shops as much as they used to.”
With this new trend on the horizon, Toma said he will continue to use C2FO to accelerate payment.
“Phantom Bikes is a lifestyle brand, yet we still have a problem accessing appropriate capital for growth,” Toma said. “C2FO’s platform is robust and allows us to access early payments, and I’m hopeful that, as we expand into other markets and work with companies that may or may not be on the platform, we’ll be able to continue working with C2FO.”
To learn how C2FO can help your company bridge cash gaps and accelerate payment, visit https://c2fo.com/vendors/.