In the News
A growing Plastics Manufacturer had major problems with its current lender. The Company had a revolving credit line based on collateral consisting of accounts receivable and inventory. Applying the respective advance rates against each type of collateral, the Company should have had the ability to borrow an additional $500,000, but the lender refused to increase the Company's credit line. The Company also had a significant amount of machinery and equipment which was either fully paid-off or had small balances owing to leasing companies.
The Company had a sizable loss last fiscal year and to make matters worst, the lender began forcing the Company to reduce the outstanding loan balance by requiring it to make weekly principal payments. The Company's accounts payable was significantly past due and started to strain supplier relationships. The Company, which is privately held, is a Sub-S Corporation with an orientation towards minimizing taxes and historically reports a break-even on its CPA reviewed financial statements. Another big challenge facing the Company was the concentration of sales and accounts receivable from one multi-national customer totaling approximately 70% of sales.
Creative Financing Solution:
Asset Enhancement Solutions, LLC ("AES") arranged financing with an aggressive Asset-Based Lender that not only increased the Company's Revolving Line of Credit by 55%, but also gave the Company a sizable term-loan against its machinery and equipment. This credit line also provided a higher advance rate against accounts receivable and increased the ability to borrow against inventory by over 200%! Even the interest rate charged by the new Asset-Based Lender was .5% lower. This line provided the Company with a significant increase in borrowing ability which allowed it to bring vendors more current. The new lender provided the Company with the working capital necessary to finance its historical double digit sales growth.
Neil Seiden, 516-767-0100
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