flexible financing in a time of need - using account receivable factoring to fund growth
TRANSCRIPT
A Bridge Back to the Bank: Flexibility in a
Time of Need
Every day, rapidly growing companies face a common cash-flow conundrum: a limited line of
credit. Once a bank establishes a line of credit on a company’s past performance it’s difficult
to increase that line. A young, emergent company expecting a spike in business that requires
quick cash is often constrained by the bank’s regulations and inability to act outside a
traditional loan standard.
Here’s a recent example:
A housewares company was doing $1 million in annual sales and had a $100,000 line of credit
from the bank. However, a massive new order increased sales to almost $3 million. The bank
line was clearly not sufficient to increase operational capacity. With a Gibraltar borrowing base
factoring solution, the business grew sales in a flexible way and now has a monthly borrowing
need of almost $500,000—five times larger than what the bank could provide.
The beauty of borrowing base factoring
Banks refer companies like this to factors all the time, because instead of looking at past
performance, a borrowing base factoring solution like ours leverages a company’s accounts
receivable and/or inventory to establish a flexible line of credit that can grow as sales grow.
This helps companies accept new contracts with confidence, access crucial funds to fulfill these
orders, and maintain a healthy relationship with suppliers while obtaining favorable pricing with
current vendors.
A smart path back to the bank
These same clients can continue a relationship with the bank for deposits and future lending
needs. Once growth levels off and its line of credit need becomes more predictable, the
company will be able to return to the bank for a more traditional line of credit. Typically, banks
will look at a company’s past year’s performance, as well as requiring a full year of
profitability, sales growth under 30% year-over-year and a history of sufficient revenues.
The bridge back to the bank is a forward-looking proposition. Borrowing base factoring is a
flexible, empowering tool that ultimately can return a healthier, more profitable company back
to the bank.
Contact a Gibraltar representative to learn more about why borrowing base factoring could be a
smart solution for your cash-flow needs.
Chris Lehnes (203) 304-9527 [email protected] www.youtube.com/user/chrislehnes www.gibraltarbc.com