Unique Debt Placement for a Medium-Sized Business

Do you need cash flow to run your business? This recent case may be of interest to you.

Many businesses continuously seek solutions to fund day to day operations. However, due to their banks’ extensive reporting requirements as well as covenants, these businesses often cannot find seamless solutions from their primary senior banking facilities.

In this case, the company – a manufacturer – had extensive orders that it needed to fill, but did not have the available cash flow to service these orders. In the past, the company had lost out to its competition because it could not provide the timing or the quantity of product that it needed in order to grow and be competitive on a larger scale. The client had approached their bank for an increase in their operating line in order to increase their inventory, but the bank required even more leverage on personal assets in order to do so. The company was stuck in a zero-sum game: unable to increase its cash flow to facilitate new sales, and unable to facilitate new sales because it was unable to increase its cash flow.

In order to provide this company with the cash flow it needed, we immediately arranged a purchase order financing facility which financed existing orders from customers, using existing inventory as security, all of which subordinated to the company’s senior bank line. This was a seamless solution for the company, because all of the initial cash flow requirements were provided by the lender. This allowed the company to sell into the market place with confidence and with the knowledge that it could match its competition.

After this facility was in place, the financial statements for the company immediately improved: they showed a larger gross margin and increased revenue, with the same amount of equity on the balance sheet. We then approached the company’s bank and renegotiated their operating line based on the strength of the business’s improved financials, increasing it dramatically and removing the personal guarantee requirements.

Too often, companies are not aware of debt solutions that are available in the marketplace. As a result, they make adverse decisions, such as selling shares of their company or allowing their banks to leverage their personal assets beyond what is reasonable, in order to raise cash flow for the business.

Our financial solution not only ensured that the company would be poised for growth for many years, but also ensured that it could easily solve its day to day cash flow needs for years to come.