Background:
A small spice manufacturer’s senior operations team was bogged down with financial management hampering their ability to focus on the business and logistical operations necessary to grow the company.
Financing Solution: Factoring
Initial Amount: $300,000
Line Increase: $150,000 one year later
Location: West Coast
Industry: Food Manufacturing
Problem:
A 20-year old spice manufacturing company had an excellent selection of proprietary products with strong distribution but struggled with cash flow. Over the years they had used credit cards to pay for raw material purchases and shareholder loans to finance business operations. They had a payroll tax issue that distracted senior management from day-to-day operations. Then their largest customer, which accounted for nearly 60% of their sales volume, changed their payment terms to Net 90, putting more stress on cash flow.
Solution:
Commercial Funding Inc.’s Business Development Officer consulted with senior management to examine their financial situation and evaluate their challenges. From that consultation the company determined they needed to focus on three things:
- Improve cash flow
- Resolve the payroll tax issue
- Clean up and streamline financial statements and reporting
In less than three weeks CFI provided an accounts receivable factoring line that turned their invoices into faster cash, even accommodating availability of up to 120 days for their largest customer.
The factoring line improved their cash flow and reduced their reliance on credit cards to fund purchases. The company also retained a tax attorney to assist with their payroll tax issue and worked with their CPA to cleanup and simply their financial reporting. All this allowed senior management time to focus on the business operations to help build and grow the business.
Their factoring line and relationship with CFI helped them:
- Make operating improvements to their financial structure
- Simplify bookkeeping
- Improve cash flow by reducing the time from invoice to cash received
- Eliminate the need to make raw material purchases using credit cards
One year after opening their original funding line, their receivables had grown by 50%. Before they even reached their maximum limit, their dedicated account manager reached out and proactively suggested a funding line increase. Their original funding line and improved cash flow enabled them to add new customers and grow their business.
