Background:
The company provides certified canine and handler teams for detection of explosives and explosive materials in air cargo. Founded by a former police officer and canine handler, the company has been growing rapidly in part due to a federally mandated regulation, stating that 100% of cargo being exported from the U.S. be screened.
Financing Solution: Factoring
Initial Amount: $200,000
Location: West Coast
Industry: Airline Cargo and Security Screening Services
Problem:
In business for only a year and a half, this young company recognized an opportunity to provide certified airline cargo screening services to ground handling companies and airlines. Due to the federal mandate and the increased demand for these services, the company quickly scaled up by hiring employees and training canine and handler teams. As a result, their business was growing rapidly by taking on new contracts and expanding outside of the air cargo detection business.
Because the company was considered a start-up, they did not qualify for traditional bank financing. They had a small factoring line with a factoring company, but the financing costs were high. Additionally, their largest customer had gotten behind in payments because invoicing was not going to the correct person for payment processing and approval.
The company was experiencing cash flow issues because they needed to continually cover payroll for two months (from time of service to time of invoice payment) without being paid on their invoices. Their current factoring line wasn’t large enough to meet their payroll or add handling teams to their employee count.
They were looking for a factoring company that would offer a higher funding line, better pricing, improved customer service, and an opportunity to grow.
Solution:
Commercial Funding did initial research on their largest clients and determined they had good credit histories, despite their largest client being behind on payments. Additionally, the owner’s experience in law enforcement and work with canine handling gave him several years of industry expertise.
In less than three weeks from initial proposal, CFI provided an accounts receivable factoring line that turned their invoices into faster cash and reduced their current factoring costs.
Their relationship with CFI has helped the company:
- Bring their largest client current on payments
- Improve cash flow by reducing the time from invoice to cash received
- Vet and approve new customers
- Verify invoices by assuring that required back-up accompany certain invoices
- Reduced internal time required for bookkeeping and invoice verification
In the first two months of the new factoring contract, the company has added 20 new canine teams to their payroll and landed a new contract adding more than $1 million to their projected annual revenue.
