Situation
Formed in 2017, this woman-owned business provides welding and steel erection services across the eastern United States. The company was historically profitable and maintained a small line of credit with their local community bank, which was sufficient for their needs. When the company was awarded multiple larger jobs, they approached their bank for an increase to their line of credit.
Unfortunately, the historical cash flow did not support an increase to their existing $200,000 LOC at the bank. Instead of telling a good customer “No,” the bank referred them to Magnolia Financial.
Solution
Rather than focusing on the company’s prior year cash flow, Magnolia based its credit decision on the company’s growth potential and their quality Accounts Receivable due from very large and creditworthy customers. Within 24 hours of meeting with both the company and their bank, Magnolia extended the company a $500,000 Accounts Receivable line of credit with the ability to increase as the business scales.
The Magnolia credit facility not only paid off the bank LOC, but also provided significantly more availability so the company could execute on the new contracts. Best of all, the bank was able to keep the existing deposit relationship and will look to bring back the larger LOC within 12-18 months. Neither would have been possible without the assistance of Magnolia Financial.
