Leveraging receivables to fund business growth

A Michigan-based commercial glazing company needed capital to fund its expanding operations. The company had a $200,000 revolving credit facility and a $200,000 term loan. Its average receivables, based on a $5 million business on a 60 to 90 day cycle averaged $1,000,000. The company asked The Liquidity Source to help it obtain an increase on its existing loans. However, after analyzing the company’s situation and taking its near-term financial needs and long-term organizational goals into consideration, The Lending Source recommended they consider obtaining an asset-based loan with accounts receivable financing instead.

We compiled the necessary financial data and prepared the loan package, ensuring that lenders would have all of the information they would need to take the loan to committee for approval. After contacting several lending institutions that we knew might be interested in and willing to approve a loan with these terms, we successfully negotiated a new, asset-based loan with accounts receivable financing at 75 percent. With a $750,000 line of credit, our client was able to pay off the revolving credit facility and the term loan and now had access to an additional $350,000 to fund its growth.

Creative options to provide immediate liquidity

A New York-based manufacturer and importer of air-powered tools and builders' hardware was losing money and desperately needed access to capital to enable it to ride out the storm. The company had a $2 million mortgage on the building it owned and where its nationwide operations were based. The appraised value of the real estate was $12 million. The Liquidity Source devised an option that would allow the client to tap into its real estate equity without having to relocate the business. We negotiated a sale leaseback in the amount of $6 million. The $2 million mortgage was paid down, leaving the company with access to $4 million to address its near-term capital needs.

Negotiating better terms by creating a competitive environment

A New York-based apparel company needed to access additional capital for liquidity and growth. The company had an accounts receivable agreement with a conservative lending institution at 65 percent of outstanding receivables. After analyzing the its financial position and discussing its financial goals, The Liquidity Source recommended that the company look at different options, both in terms of financial products and in terms of lenders. We successfully negotiated a new accounts receivable agreement with a different lender at 80 percent of outstanding receivables. The lender also agreed to provide a 50 percent advance on inventory. The new terms enabled the company to free up some of the cash it had tied up in inventory for more pressing needs.