Earlier this year, the owner of a plastics injection molding business in Northern Ontario approached his banker about obtaining a working capital line of credit to help cover cash flow shortfalls. "Our banker wasn't able to accommodate our financing request, but he did refer us to CFG" says the owner.
CFG set the business up with a $750,000 A/R based line of credit to help cover the cash flow shortfalls. With CFG's support, the owner is now confident that he can continue to grow the business without the fear of running out of cash.
Benefit to the bank: Acquired the business' DDA account, provided term note for the business, potential future opportunities to lend working capital to the business.
Growing a business through acquisitions takes capital and usually lots of it. An Ontario company that specializes in manufacturing fixtures for retail stores was growing rapidly by acquiring other similar businesses. The problem was that the acquisitions required the business to buy new equipment, which banks are hesitant to finance due to the rapid expansion.
Fortunately, the company's bank referred them to CFG, which established a factoring facility that is now providing the capital to buy the equipment needed for the company to continue its growth through acquisition strategy.
By factoring receivables with CFG, the company has regained control of its cash flow. Factoring has been the perfect financing solution for this fast-growing business.
Benefit to the bank: Retained a valuable client who has gone on to grow and purchase a U.S. competitor, business requires a host of new services and has the potential to become bankable again
A company that manufactures and sells air filters experienced rapid growth last year, but the growth wasn't evenly spread out - it doubled its sales over the summer and again for a couple of months last winter. The company had a bank line of credit in place, but it soon became clear that it wasn't the right tool.
CFG was able to help the company by working with its bank to substantially pay down its line of credit so they could release the Accounts Receivable. After two years of struggling because of their two busy seasons, the company has the best of both worlds.Â They can take advantage of bank financing during the slow times and factoring when it gets crazy.
Benefit to the bank: Continues to provide DDA account, line of credit and other services to an otherwise unqualified client business with the potential to grow
For businesses that deal with law firms and insurers, the question isn't necessarily if they will get paid, but when. To cover cash flow gaps caused by slow-paying clients, a startup court reporting company in Ontario approached CFG on a referral from its banker.
"We don't have the track record or financials needed to qualify for a traditional bank line of credit," says the owner. "This makes an A/R based line of credit from CFG the right solution for us. It provides the working capital we need, especially as we're ramping up this new business quickly."
The owner explains that he and his partners have put substantial equity into the business. "But we want to use our equity to grow and expand our footprint, not finance working capital. CFG also wants us to grow so they can lend us more money, so it's a perfect fit."
Benefit to the bank: Retention of the business' DDA account, opportunity to provide personal banking services to the owner, potential future lending opportunities to the business.
When an Alberta fabrication business that specializes in welding and fabrication for tanks and vessels began landing larger contracts last year, it was thrilled about the new business and additional revenue. However, it struggled to cover the cash flow needed to purchase materials and equipment that were needed upfront to perform the jobs.
"We're a small company and didn't have the collateral our bank required. Fortunately, our banker wanted to help us, so he referred us to CFG."
Six months later, the business is thriving. "CFG has provided the cash flow we need to take on these big contracts and continue to grow the business," says the owner. "It's perfect for smaller businesses like ours that don't have the scale banks are looking for."
Benefit to the bank: Retention of the business' DDA account, bank was repaid from a challenging credit
Last year, four young entrepreneurs in Alberta seized upon what they viewed as a business opportunity of a lifetime to buy the assets of a company that manufactures high-quality eye joists used in home construction. Because the business was in distress, its assets were available at fire-sale prices. So they found some outside financing and invested all their own personal savings in the deal.
The business' pipeline filled with orders quickly, but the young entrepreneurs underestimated the working capital and ongoing cash flow that would be necessary to sustain the business. Since they were a start-up, they couldn't obtain bank financing, and they didn't want to dilute their ownership by selling more equity.
A consultant referred the entrepreneurs to CFG, who set them up with a $600,000 factoring line of credit, which was soon raised to $800,000. This provided the working capital the business needed to fill orders and satisfy customers.
Benefit to the bank: The consultant has since introduced the manufacturer to a new bank that is quite happy with the active DDA and other services it now provides, and in a couple of years, the business may be bankable.