Hi DF,

We have recently closed a few deals where the business either had a line with their bank (not big enough) or was factoring with one of our competitors and then took cash advances only to find themselves needing more liquidity.

-Line of Credit and cash advances. The Company was growing quickly and their bank was not willing to keep pace with the growth so the owner took out two cash advances and was seeking an alternative. They are a manufacturer that went from $2mil in sales to $8mil in sales. The had $500K line of credit and two advances totaling $225K.
We offered a factoring facility including some inventory that was able to pay off the line and cash advance balances as well as provide liquidity at closing and on a revolving basis going forward. Facility total was $1.5Mil with low double digit all in pricing. When the owner did the math on what he paid for advances and the line we were a better alternative and could keep pace with his growth.

-Factoring client: 12Mil staffing company factoring with one of our competitors and took $150K in two advances. AR was 2.5Mil outstanding. Factoring fees were around 26% all in and the cash advance fees were around 22% all in. The advance rate on AR was 87%. We offered a $3mil factoring facility with a 92% advance rate on AR at 13% all in. We were in competition with one of our competitors that offered $3mil with a 90% advance rate at 18%.....guess who won? They client is saving over $125K/year on factoring fees alone.....

There are some alternatives out there to help clients that may not want anther advance. Since we have a very low cost of funds and know the industries we finance well, we can offer some interesting solutions and at the same time give you a happy, sticky customer while making some handsome commissions. In both cases the brokers that brought us these deals were impressed with how we approached the deals, the speed in which we moved, the pricing of the transactions, and realized they make more money than if they just did another advance. The broker that brought us the staffing deal had never done a factoring deal before. I am working on another with him as I type....

Best,

Kevin