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Computer Networking Products Distributor

 

SITUATION

This family-owned company founded in 2003 distributes voice, data, networking, and security products to a variety of commercial customers throughout the southeast. After nearly a decade of increasing profits, the company suffered a significant net loss in 2014.  As a result, their bank closed their line of credit and converted the balance to a Term Loan.  The company's largest supplier also began to limit new shipments due to payments going beyond terms.  When business began to improve again, the company struggled to fulfill new orders in a timely manner due to constraints from their supplier which resulted from a lack of working capital. 

 

SOLUTION 

Magnolia Financial stepped in as an alternative solution. Instead of focusing on the previous year's loss, Magnolia saw the potential and extended the business a $500,000 working capital line of credit secured only by the company's Accounts Receivable. Magnolia made a significant pay down of the term loan at closing, reducing the bank's exposure.  The additional cash flow management provided by Magnolia's Accounts Receivable financing also allowed the company to pay suppliers more promptly and meet the increased demand. Without the credit facility from Magnolia, this improvement in both the bank and the company's position would not have been possible.