SlideBelts, an innovative belt company based in El Dorado Hills that is among the nation’s fastest-growing businesses, filed for Chapter 11 bankruptcy last week.
The company, which offers belts without holes that use a ratchet system based on a Moldovan military design that owners Brig and Michelle Taylor patented for sale, was recently named on Inc. Magazine’s annual list of the 5,000 fastest-growing companies in the United States, with three-year revenue growth of 328%.
Yet this rapid expansion may be to blame for SlideBelts’ recent bankruptcy filing.
In a declaration filed with the U.S. Bankruptcy Court for the Eastern District of California, company President and CEO Brig Taylor said, “SlideBelts’ aggressive growth model turned out to be largely unnecessary.”
From its origins as a startup working out of a garage in 2007 and its early successes tapping into a niche market, the company organized in 2013 and a few years later, it had expanded to almost 40 employees and was selling nearly 60,000 units annually, the declaration said.
Under this fast-paced model, which propelled the company to $12.3 million in revenue last year, SlideBelts assumed more risk, Brig Taylor said in the declaration, and he now seeks to scale the business down to a more sustainable model — wherein the company would be making $5 million to $7 million in annual revenue.
“The primary reason for SlideBelts’ need for reorganization in Chapter 11 is that the company needs time to transition from ‘sprint mode’ into a slower ‘marathon mode,’ ” the declaration said.
SlideBelts attempted to use regulation crowdfunding to pay down its loans and debts, but its crowdfunding campaign came up far short of performance expectations. It estimated it would receive $3 million in the first half of 2019 through regulation crowdfunding, but brought in only $400,000, according to the declaration.
“The failure of the Regulation A crowdfunding campaign forced the Debtor (SlideBelts) to make the transition more quickly than it could afford, leading to a liquidity crisis and the need for protection in chapter 11,” the declaration said. “In 2019, with sales and advertising being scaled back, the Debtor was suddenly overextended on inventory, operations, employee headcount, and financing, rendering the Debtor unable to pay its debts as they come due.”
SlideBelts has moved its manufacturing operations from Taiwan to a cheaper Chinese manufacturer, switched to boat shipping rather than air and terminated many employees, making annual savings of more than $1.1 million. The company has a total of about $5.5 million in secured and unsecured debt, according to the declaration.