Manufacturer Dropped By Lender, Needs Working Capital Solution
The client, a Midwest based company, founded in 2011, by two industry sales executives, manufactures an accessory for medical equipment used in hospitals and outpatient centers. The Company has direct sales to medical facilities and large distributors in the healthcare market. Their product inventory is warehoused at a 3rd party logistics center, and relies heavily on drop shipments originating on the east and west coasts. With a profitable 2015 the Company had expectations to grow their operation in 2016.
In the summer of 2016, an abrupt change in senior management resulted in one of the partners exiting the Company. At the time, the company’s capital needs were largely supported by the exiting partner’s personal credit references of approximately $300K. As a result, their credit line would need to be replaced with a more sustainable long term solution. With the challenge of the company’s limited equity, many traditional financial institutions were reluctant to supply a similar approval.
Additional constraints included a 40% decrease in revenue year-over-year, depleting normalized inventory levels. This was compounded by extended terms and lack of capital as the company relied on the turnover of its receivable base to coordinate cash-flow. Supplier relationships were tested delaying future orders and the addition of new customers. The Company’s sole owner was in a difficult position as a long term working capital facility was desperately required.
Enter Seacoast Business Funding to provide the solution. Seacoast quickly reviewed the Company’s underlying challenges and provided a custom line of credit that fit the business needs. Entrusting Seacoast Business Funding to deliver an accounts receivables financing solution led to a faster availability of cash and added liquidity for the Company; resulting in projected revenues and earnings to increase by 67%.
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