Accounts Receivable Line of Credit

Safety Equipment Distributor

Situation

Formed just a few years ago, this distributor of fire & rescue, medical and safety equipment sells to a variety of local governmental agencies as well as commercial and industrial customers.  The company built a reputation for providing a high-quality product at a competitive price.  As a result, the business grew their small but solid customer base.  As the company looked to expand outside of North Carolina, they approached their local bank for a working capital line of credit to support their growth.  Unfortunately, with a limited operating history and minimal profitability, the bank was unable to approve them for a line of credit.  Instead of simply telling the company "No", the banker referred the owner to Magnolia Financial as an alternative  funding solution.

Solution

Instead of focusing on cash flow and the historical financials, Magnolia Financial understood the value in the customer base and extended the company a $300,000 Accounts Receivable Line of Credit.  Magnolia also provided advances against Purchase Orders as the company needed help staying current with their suppliers given the rapid growth.  Instead of worrying about cash flow and customers taking 45-days or more to pay, the company now has immediate access to cash so they can focus on growing the business.  Best of all, the bank was able to keep the deposit relationship and hopes to be able to provide the line of credit within 12-18 months.

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