Accounts Receivable Line of Credit

Frozen Foods Distributor

Situation

This North Carolina based company sells locally sourced frozen fruits and smoothie kits to a variety of customers across the United States.  Despite significant growth over the years, the company had yet to report a profit and had a deficit net worth on the balance sheet.  Cashflow was tight as the company had gotten behind on vendor payables.  The company needed cash to support the business but did not want to dilute the ownership structure by raising more equity.  Without any historical profitability, their bank was unable to extend the company a line of credit.  

Solution

Instead of focusing on the losses and negative equity, Magnolia Financial relied on the value in the company's strong Accounts Receivable.  As a result, Magnolia immediately extended the company a $1,000,000 line of credit.  The company now has immediate access to cash rather than having to wait 30, 45 days or more for customers to pay.  The funds provided by Magnolia Financial are being used to reduce past due payables as the company works towards profitability.  The company can now focus on its turnaround plan to generate a profit rather than worrying about day-to-day cash flow.  

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