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Building capacity for operational growth for a construction equipment distributor
Accounts Receivable Line of Credit
Situation
Headquartered in South Carolina, this distributor of refurbished construction tools and equipment sells to a variety of customers throughout the United States and Canada. Although the company grew revenues over 50% from the previous year, cash became tight because suppliers required cash up front, but customers demanded extended terms. With limited net income from the previous year, the company did not qualify for a large enough line of credit to support their rapid growth.
Solution
With extensive experience financing distributors, Magnolia Financial understood the cash cycle of the business and the quality of the customer base. As a result, Magnolia extended the company a $500,000 working capital line of credit secured only by their Accounts Receivable. Using the funds provided by Magnolia Financial, the company now has enough working capital to meet their growing cash demands. Instead of worrying how to keep up with supplier payments, the company can now focus on its operational growth plan without the hassle of cash constraints. As a result, the company now expects to post a record profit this year.