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  1. #1

    High Volume Client looking to replace High Interest Business Loan

    I have a client that owns a well-established, 64 year old national company with blue chip clients. Last year, he was in a cash crunch, like many other businesses and to help his cash flow, I got him a business loan of $500,000 with an interest rate of 11.00%. This year, his company has recovered and from January through August, has averaged a monthly sales volume of $893,000. He would like to refinance the current high-interest rate loan ASAP! His FICO is 792. If you have the resources to provide a business loan below 8.00%, please contact me. Because of the loss showing for 2019 on his tax return, he is not eligible for any SBA products.

    Tom Harrier
    Integrity Commercial Loans, LLC
    broker@tomharrier.net
    407-928-8542
    Last edited by MissouriBroker1; 09-16-2020 at 06:33 PM.

  2. #2
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    This seems like a "Kevin Henry" deal to me...

  3. #3
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    Is his EBITDA a loss though? The interest expense on these high interest debts is typically pretty high which will make the EBITDA profitable. A company like that typically will have good tax strategies that will lower the profit but does not impact EBITDA.

    If he did a 179 deduction, then this can be added back as well. Does he rent or own his facilities? He may have the option to buy his facilities and then he can add rent back to his EBITDA which will be a 2 fold for him.

    If you are looking for the quickest option, then a factoring deal will be the best. With those type of clients, he will be able to get a favorable facility. Check out LSQ. They have great customer service and the pay out is higher than average

  4. #4
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    Quote Originally Posted by mistamca View Post
    Is his EBITDA a loss though? The interest expense on these high interest debts is typically pretty high which will make the EBITDA profitable. A company like that typically will have good tax strategies that will lower the profit but does not impact EBITDA.

    If he did a 179 deduction, then this can be added back as well. Does he rent or own his facilities? He may have the option to buy his facilities and then he can add rent back to his EBITDA which will be a 2 fold for him.

    If you are looking for the quickest option, then a factoring deal will be the best. With those type of clients, he will be able to get a favorable facility. Check out LSQ. They have great customer service and the pay out is higher than average
    LSQ is NOT doing a deal at 8% for a company this size.
    Hedley Lamarr......That's Hedley

  5. #5
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    8% is relative. By factoring, CF is freed up from a short term loan. If their weighted cost decreases to 8%, then they get what they asked for plus the sales rep makes more money while keeping them on their books

  6. #6
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    Their weighted cost will never get to 8% with them. The cost of capital will prevent this. They need to work with a factor with lower cost of capital or see if the company qualifies for a non-bank asset based line of credit with a lender with a low cost of capital. Cost of capital is key not only to the client, but the referral source as well. The client will be happy and stick around an the broker makes more on the deal because of the lower capital cost and the longevity of the client.

    You can't price a factoring deal at 8% with a cost of capital between 4% and 6%. It just does not work. You can if your cost of capital is sub 2%.
    Hedley Lamarr......That's Hedley

  7. #7
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    You're not wrong but I am looking at all their financing for the weighted cost. If they have 200k in car notes @3.5, a bank LOC of 300k @ 4.9, and then factor 500k @ 12 then your cost of capital is 8%

    There is also the freeing up cash flow from the refi which will lowers their capital requirement which will allow them to take on higher debt than the 8% requested and still be in a better net position

  8. #8
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    Quote Originally Posted by mistamca View Post
    You're not wrong but I am looking at all their financing for the weighted cost. If they have 200k in car notes @3.5, a bank LOC of 300k @ 4.9, and then factor 500k @ 12 then your cost of capital is 8%

    There is also the freeing up cash flow from the refi which will lowers their capital requirement which will allow them to take on higher debt than the 8% requested and still be in a better net position
    Or better-Just finance the business assets for under 8% and call it a day.
    Hedley Lamarr......That's Hedley

  9. #9
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    Is it 11% an APR or some BS 11% CoC? What industry of clients? If commercial, u need to go to a bank that factors, such as Kevin Henry’s bank (assuming these are factor-able invoices). If government, I know Breakout can help on that or u can go to government factors. But I agree with others, your WACC is going to above 8% without a full refinancing, and with a factor, that would require a substantial amount of their revenue generated via invoices from AAA-credits.

    Why can’t he refinance with a bank loan?
    Carl Fairbank
    Founder & CEO boldMODE
    www.boldmode.com
    Carl@boldmode.com
    Founder & former CEO of Breakout Capital (sold to SecurCapital in 2019)
    www.breakoutfinance.com

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