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Rescuing an emergency vehicle upfitter from cash flow imbalances
Accounts Receivable Line of Credit
Situation
This early-stage company installs and upfits police and emergency vehicles with the required lighting, electronics, and technology. Started by a former police officer, the company gradually grew its municipal customer base. As sales steadily increased, the company’s cash flow lagged as customers paid in 45, 60 days, or more while supplier payments were due strictly on 30-day terms. In order to improve cash flow for the growing business, the owner approached his local bank for a working capital line of credit. With limited financial reporting and a lack of historical profitability, the bank was unable to approve the line of credit request. As an alternative funding solution, the bank introduced the company to Magnolia Financial.
Solution
Despite the lack of financial information to review, Magnolia Financial focused on the strong, credit-worthy customer base which was made up primarily of municipalities. Within 24 hours of the initial meeting, Magnolia extended the company a $250,000 Accounts Receivable Line of Credit. With the additional working capital provided by Magnolia, the company can now fulfill new contracts on a more timely basis rather than waiting to be paid by existing customers. The owner no longer has to turn away new business because of a lack of cash flow and can simply focus on growing the business. That would not have been possible without the Accounts Receivable Line of Credit provided by Magnolia Financial.