In early 2021, Metropolitan Partners Group (MPG) needed technical due diligence help with a prospective borrower who planned to manufacture a new design of N95 mask in the United States. As a private credit fund manager, MPG provides collateralized loans to small and mid-sized businesses that are going through a period of growth or transition and lack access to conventional capital. Their lending process routinely includes engaging subject matter experts to provide insight into companies seeking funding.
MPG sought Eric out to conduct this technical due diligence based on his demonstrated expertise in the field of personal protective equipment (PPE). This knowledge, coupled with his 35+ years of experience in product innovation, product design and development, manufacturing, and product commercialization, allowed Eric to render an expert opinion on the product design, manufacturing readiness, and market potential of the prospective borrower’s proposed N95 mask offering.
When lenders, venture capitalists, or angel investors support a business, they do so in the expectation of receiving a return on their investment (ROI). Conducting technical due diligence can help determine the likelihood of that ROI and thus reduce the risk associated with lending to or investing in a novel manufacturing or distribution enterprise.
Eric’s analysis for MPG looked at critical aspects of design and manufacturing to determine if extending a loan would be wise, as well as the market potential for the proposed N95 mask offering. He rapidly discovered a myriad of potential problems. The rapid tightening of the supply chain for the mask’s filter materials due to the COVID-19 pandemic threatened to limit production capacity. The prospective borrower was not ready with key parts of their manufacturing processes and equipment for components and assemblies. Their personnel had little directly relevant experience in PPE manufacturing, and they had yet to obtain the necessary NIOSH approval to sell their N95 masks. Eric also reported to MPG that their prospective borrower would be entering a potentially flooded market for N95 masks, since the product would likely not be ready for 6 to 12 months.
In light of the supply chain, product design, manufacturing, quality control, and market potential issues he identified, Eric recommended that MPG not lend to the prospective borrower in this case. MPG’s Senior Advisor John Ioannou shared in a testimonial, “[Eric’s] ability to get to the heart of technical matters very quickly was instrumental in our ultimate decision. We would bring Eric back should the need arise for his product and manufacturing expertise.”