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Covering a specialty carpet distributor's cash flow needs
Accounts Receivable & Inventory Line of Credit
Situation
This early-stage, family-run business sells specialty carpet lines throughout the southeastern United States. With over 60 years’ combined industry experience, the owners quickly grew revenues from a diverse base of customers. Although its primary supplier offered extended terms, the company did not have enough trade credit to support the increasing sales. In order to finance the company’s growth, the owners approached their local bank for a working capital line of credit. Unfortunately, the company had yet to report a profit and had a deficit net worth on the balance sheet. As a result, their banker was unable to approve the credit request. To provide the company with an alternative solution, the banker referred the company to Magnolia Financial.
Solution
At the initial meeting with the company, Magnolia Financial immediately recognized the strength of the management team and the growth potential. Within 24 hours of the meeting, Magnolia extended the company a $500,000 working capital line of credit secured by both Accounts Receivable and Inventory. Instead of waiting 45 days or more for their customers to pay, the company now has immediate access to the necessary cash to grow the business. Magnolia Financial is also advancing against the company’s inventory, providing even more working capital. As a result, the company can pay its primary supplier quicker so they can fulfill open purchase orders. The bank was able to keep the deposit relationship and expects to provide the company with a traditional line of credit within 9 to 12 months.