Situation
This manufacturer and distributor specializes in providing eco-friendly pest control solutions that avoid harmful chemicals. Their niche product caught the attention of major retailers across the United States and the company began to grow exponentially. As their growth began to outpace their cash reserves, the company approached their local bank about a working capital line of credit to support the increased volume of business. Despite the significant uptick in revenues, the company did not show a profit the previous two years, so the bank was unable to extend a traditional line of credit. In order to provide the company with an alternative solution, the banker referred the company to Magnolia Financial.
Solution
Despite the company’s historical losses, Magnolia Financial understood the inherent value of a strong customer base and inventory. As a result, we extended the company a $1,500,000 Asset-Based Line of Credit secured by Accounts Receivable and Inventory for its expansion plans. Magnolia’s credit facility provided a significant increase in liquidity that allowed the company to execute its growth strategy. The referring bank was able to keep the deposit relationship and expand treasury services as Magnolia established a Deposit Account Control Agreement (“DACA”) at the bank. It was a win-win for both the bank and their valuable customer. Best of all, the bank expects to take over the line of credit from Magnolia within the next 18-24 months.