Packaging Material Supplier

Situation

This company has been in business for over 25 years.  Despite the recent economic downturn, the company managed to maintain profitability over the previous three years.  Although the company remained profitable, their Balance Sheet showed a deficit Net Worth due primarily to significant payables owed to suppliers.  Although their Business Banker recently refinanced the company’s building, he was unable to extend the company a Line of Credit due to the Negative Equity.  In order to maintain the relationship and provide the company with an alternative, the lender referred the company to Magnolia Financial.

Solution

With confidence in the owner and his strategy for growth, Magnolia Financial extended the company a $400,000 working capital line of credit secured by Accounts Receivable.  The cash infusion provided by Magnolia allows the company to keep its primary supplier current; therefore increasing their vendor line of credit.  The company is now able to purchase more raw materials to fulfill an increase in customer orders without cash constraints.  Since Magnolia’s Credit Facility does not have an early termination penalty and is effectively month-to-month, the bank will look to provide the company with a traditional bank line of credit in 12 months.

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