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Securing financing for a specialty packaging company
Accounts Receivable Line of Credit
Situation
A manufacturer of specialized packaging for automotive and other industrial customers was established in 2013 as a U.S. subsidiary of a foreign parent company. As the domestic entity continued to grow, they approached their local bank for a traditional line of credit. With historical losses and significant negative equity (due to trade payables owed to the parent company), their bank was unable to provide the funding. However, in an effort to build a relationship for the future, the banker introduced Magnolia Financial as an alternative solution for the interim.
Solution
With significant experience funding domestic subsidiaries, the Magnolia team easily identified the company’s growth opportunity. Instead of focusing on the historical losses and deficit equity position, Magnolia recognized the value of the company’s customer relationships and structured a $1 million Line of Credit secured only by the company’s Accounts Receivable, with no Personal Guarantees. The funding was used to not only support growth, but also to reduce the trade payables owed to the parent company. After just 12 months of funding with Magnolia, the company was able to secure a traditional bank line of credit with the bank that initially referred the deal to Magnolia Financial.