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Expanding a paper company's product mix to increase orders that close the loop
Accounts Receivable Line of Credit
Situation
Established in 1993, this paper coating and converting company serves customers across the southeastern United States. Although the company has a solid customer base, they reported consecutive year losses due to increased raw material and overhead costs. Part of the turnaround plan included expanding their product line into sustainability packaging and biodegradable products that promote closed-loop recycling. The company’s owner approached their local bank for a line of credit to support growth from the new product endeavor; however, their banker was unable to get the company approved due to the historical losses and lack of cash flow.
Solution
In order to provide the company with an alternative funding solution, the banker referred the owner to Magnolia Financial. Instead of focusing on the company’s historical losses, Magnolia relied on the strong customer base and immediately extended the company a $300,000 Accounts Receivable Line of Credit.
With the additional working capital supplied by Magnolia Financial, the company can now pay its suppliers in a timely manner and focus more on the new product lines rather than worrying about cash flow. Best of all, the bank was able to keep the deposit relationship and will look to provide the company with a traditional line of credit in the next 12-18 months.