Delivering working capital to a fast-growing new company
Situation
Formed in 2022, this small business imports and distributes a variety of bulk specialty chemicals across the United States. The owner has more than 30 years of industry experience working for large, multinational companies, and was able to secure a number of large contracts to help grow the business. The company had been funded with a personal Home Equity Line of Credit (“HELOC”) since its inception. However, as business increased, they needed greater access to working capital to fuel additional growth. He approached his bank for a traditional line of credit, but his banker was unable to approve the company due to a lack of historical profitability. Instead of simply telling the company “No”, the banker referred them to Magnolia financial as an alternative funding solution.
Solution
Instead of focusing on the previous year’s net loss and limited cash flow, Magnolia Financial relied on the quality and value of the company’s Accounts Receivable. As a result, Magnolia Financial extended the company a $500,000 working capital line of credit within 24 hours of the initial meeting. Using Accounts Receivable as collateral, Magnolia was able to focus on where the company is headed versus where it had been. The funds provided by Magnolia Financial are being used to cash flow larger orders that require significant prepayments to vendors. As the company’s cash flow continues to improve, the bank will look to take over the line of credit within the next 12-18 months.
