Struggling CPG Lender Ampla Up For Sale; Brands Face Credit Concerns

An important source of working capital for early stage food and beverage entrepreneurs is in turmoil as fintech consumer brand lender Ampla and its investors have spent the last several weeks fighting off collapse.

BevNET has confirmed that, after several weeks of activity that raised concern among individual clients, Ampla is selling off the company’s credit book and other assets as it fights to survive.

The lender’s fragile condition could create a mass disruption in the CPG community, particularly for small businesses that have few cash reserves to draw upon for working capital expenses like payroll, ingredients or finished products.

A spokesperson with Ampla investor VMG acknowledged that Ampla and VMG have been working to renegotiate contracts with Ampla’s lenders in recent weeks and that one of its investors, Carle Stenmark, the managing director of the VMG Technology Fund, has been working with Ampla CEO Anthony Santomo to mitigate the potential damage that could accompany an Ampla collapse. According to VMG, the company does have cash to continue operating.

Santomo did not comment for this story.

From tiny snack startups to more mature companies like Recess, Serenity Kids and Carbone’s, Ampla has hundreds of clients that rely on its credit products for short term cash, and that use its systems to receive payments to brands from slow-moving large wholesalers like UNFI and KeHE, as well as other independent distributors, retailers, and online selling platforms like Shopify. Having a disruption in those accounts could also create painful delays in the billing and payment capabilities for many of those brands.

The company reaches deep into the ranks of CPG startups. During a recent fundraising announcement, Ampla claimed to handle a run rate of more than $6 billion in transactions on behalf of its clients, and to have extended $1.5 billion in loan originations.

Already, brands with existing credit lines with Ampla are being told to repay their receivables. Meanwhile, Ampla has stopped opening new accounts and is demanding that many of its clients with outstanding loans repay them.

As it attempts to find a “soft landing” for the company through a sale, Ampla has already begun to sell some of its key lending accounts, a sign of the current unsteadiness around the company. Despite these efforts, founders are confused and concerned.

“Many founders who I have spoken with have shared that running their bank accounts through them can be very risky,” said Keith Kohler of the K2 Group, which helps find finance and lending for startup CPG brands.

What’s not clear is the reason why Ampla reached this point. The entire fintech lending sector has been stressed in recent months as the cost of capital and the regulatory environment around capital availability has been changing, as banks anticipate a tightening around lending exposure. Speculation also exists around the risk inherent in its lending practices, based on algorithmic interpretations of companies’ assets like accounts receivable, inventory, and other capital flows.

Like many newer fintech credit organizations, Ampla relies on credit lines of its own from larger banks, as well as its own equity, to fund loans to smaller companies. In September and December of last year, for example, the firm trumpeted two new large credit facilities as raises, the first a “credit warehouse” worth $258 million from Goldman Sachs and Atalaya, a special situations investor, and another a $275 million “credit facility” from Citi and funds managed by Waterfall Capital Management.

In both cases Ampla pursued those lines of credit to provide working capital and other financial products like credit cards to consumer startup founders. Much of Ampla’s initial funding came from a $60 million Series A round in December, 2021 from consumer and consumer tech investors like VMG’s technology-focused Catalyst fund (now called the VMG Technology Fund), Forerunner, M13, Infinity Ventures, and Core Innovation Capital.

Founded by former investment banker Santomo and fellow investor Jim Cummings, Ampla was initially known as Gourmet Growth Inc.; Santomo had initially begun an informal lending relationship with CPG brands that he felt was de-risked by his own knowledge of the supply chain, learned from his then-fiance’s father, who ran an LTL (less-than full truckload) company dealing with food, beverage and pharmaceuticals.

Ampla’s signature product is its growth line of credit, but it also provides a business Visa card and banking services. Those banking services became increasingly important for the company as it grew, because they offered the company visibility into its client accounts to better manage risk – an advantage when it comes to seeking funding from larger lenders.

Because of its ability to provide easy working capital, In 2023 Ampla was listed by INC magazine as a “power partner” for growing companies.

But as the company expanded, it also began to tighten its credit terms; throughout the past year, in the wake of last spring’s Silicon Valley Bank crisis, regulators have been pushing the lending markets for more visibility and less risk, which eventually comes back down to end users.

Entrepreneurs BevNET spoke with complained of changing credit terms, at times adjusted according to their willingness to use Ampla’s proprietary banking services alongside their lines of credit.

All of the entrepreneurs interviewed by BevNET insisted on anonymity for the simple reason that their accounts receivable – payments from distributors, retailers, and online sales platforms – are still going into their Ampla accounts.

One snack company founder, who has been working with Ampla since 2021, said he had initially appreciated the company because it offered him a line of credit of more than $150,000 while he was still a startup. Having those lines of credit was important because cashflow for a startup is intermittent and payments need to be made regularly, so credit is used to bridge the gap.

In the past year, however, his relationship with Ampla soured. After the company had convinced him to start using their proprietary banking products to serve as the clearinghouse for his purchases and sales – effectively making it a transactional banker – the company’s visibility into his fluctuating cash levels, receivables and distributor chargebacks would cause it to frequently change his credit line to unreliably small levels. At times when he might have to fill an enticing order for goods, he said, the company would have reduced his line of credit, rather than making money available at an important growth stage for the company.

With a growing number of purchase orders as a potential source for securing a different line of credit through a process known as “factoring” – he allowed another financial firm access to his account. By the end of the week, he said, Ampla had reduced his line of available credit to zero.

While initially Ampla did not require brands using its credit offerings to use its systems for transactional banking, that eventually did become a requirement for many new customers. According to several finance professionals interviewed by BevNET, increasing money under management, and increased control over risk, is an asset for the company, especially if it’s in business as a lender for businesses that are cash poor. In those cases, being able to predict the risk around any company is important.

At least one of Ampla’s oldest and most significant clients – who again, refused to be named for this story – has already been on the phone with Santomo and his co-founder in the last week, expressing concern about the future of the company and his ability to recover money from his account.

His company is big enough to survive any kind of collapse and he’s already made alternate plans if things go south. But he’s also large enough and has enough steady working capital that he could work with an ordinary commercial lender if he wanted to.

Meanwhile, the smaller companies that have relied on Ampla face a much sharper set of concerns – in addition to the uncertainty about where and how their accounts will land, there’s also the question of whether Ampla’s situation will spread to other fintech lenders, if their own business models seem riskier than investors can handle. That would tighten the market for working capital loans even more.