A great way to understand factoring is to hear about real life examples, it helps to understand the benefits of having the right factoring partner, realize the struggles growing businesses in many different industries run into, see that choosing the wrong factoring company can stifle growth and learn how factoring works as a financing solution.
At Meritus Capital, we are a factoring company that services many different industries, so here are real-life accounts receivable factoring examples for each of the following industries:
36MM - Reaching the limits of their current factoring arrangement.
Our new client, a staffing company specializing in logistics was previously with another less flexible factoring company. Their company experienced recent rapid growth to near 36MM dollars in sales annually. As expected, a business growing at this pace is going to experience growing pains and this business was no exception. Their current factoring company no longer wanted to continue to work through the issues of growing at this pace and our client needed to find a factoring company that would meet their needs.
They needed a partner that would:
Meritus Capital came to the rescue and provided what they needed. We were able to give them:
This business is now well-positioned to maximize the opportunities they are being presented with. They can be far more profitable and have the tools and a financial partner in place for continued expansion.
Payroll Funding NeededChallenge: Our client in Ontario, Canada, had the experience, the relationships, and was ready to build his own company in the staffing industry. He had previously grown a company by 11MM dollars in annual revenue, but now he was ready to be an entrepreneur. The only thing he was missing was a funding partner that had the capacity to give him unlimited capital at a low rate enabling him to compete with established competitors.
Solution: We were able to provide a 2MM dollar funding line for our client at an extremely low pay rate. He will only pay that low rate on what he actually uses in funding whereby we do not force him to borrow more than is needed. The company is growing rapidly and is now positioned to leverage our capital and his experience to equal a fantastic success!
10MM line for our Staffing client“Thank you, thank you, thank you. I have never seen such team work on both sides…. Unbelievable, I am thrilled! I can’t thank you guys enough you did an incredible job. It was an incredible two-three weeks.”
It is expressions like these that make our team love what we do! Here is how it went.
Problem: This staffing client had a maxed out current bank line that wasn’t giving him the availability he needed. They came to us only weeks out from the end of the year and if they didn’t find another financing facility he would be largely penalized by his current bank.
Solution: We were able to provide him a 10MM line from term sheet to close in two weeks. This enabled the company to have the capital to continue to grow and have the liquidity to pay for necessary business expenses. He needed more availability at a competitive price and the transaction closed in a very timely manner and that's what we delivered! Both sides are very happy about how everything went and are looking forward to seeing this clients continued growth both organically and through acquisitions.
A New Workable Program for a Family-Owned Staffing CompanyChallenge: This family-owned staffing/consulting company were not happy with the service of their current funder. They needed more flexibility and better customer service satisfaction in their funding relationship so they would feel comfortable in taking on new business and growing.
Solution: Providing them with a $2MM Accounts Receivable/Payroll Funding program was just the beginning. Our program had a few significant advantages. We provided them more competitive terms, a higher advance rate, and we negotiated an Intercreditor agreement with another existing lender. We also dramatically simplified their funding process. They tell us that our personal customer service and account management has given them the expediency and flexibility that they wanted and we have been delighted to work with them.
Maxed Out Current FactorOur client, a temporary staffing company, came to us with a problem that we see again and again:
- They were experiencing successful yearly growth
- Their current factor was maxed out and unwilling to listen to their client's requests and needs
- They did not have the 'means' to grow
- The 'means' to grow
- The 'room' for growth, and
- The 'opportunity' to move forwards rather than backwards
Maxed CreditChallenge: We were recently approached by an IT Staffing Company that was working with a bank that didn't completely understand their business and growth prospects. Their line of credit was maxed out and the bank could not provide the capital they needed for current contracts, much less for upcoming government contracts that could require a six-fold increase.
Solution: Meritus provided an aggressively priced solution for a $6 Million A/R factoring LOC, not only to meet the current capital needs but to enable the CEO to negotiate larger government contracts for future growth. Meritus provided letters to the contracting officers verifying the capacity for our new client to execute on the contracts with our capital. Our experienced team provided a smooth transition for the government contract funding to balance out their cash flow needs.
Working CapitalOur new funding client came to us as a start-up company. He had tremendous growth potential, but no access to working capital needed for recruitment, sales expenses, and payroll. Meritus provided the working capital and freedom needed to exponentially grow this company from zero to $7.2 million annual run rate within the first year. With an unlimited capital line and excellent customer service, this company continues to use our finance solutions.
Outside The Box SolutionsOur new staffing client signed our agreement immediately before Hurricane Katrina struck. In dealing with the aftermath of Hurricane Katrina, they faced numerous funding and customer service challenges. This company was desperately in need of an expeditious funding solution that included a significant degree of flexibility on our part. With a resourceful and agile team of professionals, Meritus worked through the challenges of doing business during this time. Our team funded the company with an “outside the box” solution enabling the payroll/financial and customer service obligations to be fulfilled despite Hurricane Katrina’s upheaval.
Growth & SecurityAfter suffering several financial setbacks including a sharp downturn in revenue, seasonal cycles, and poor credit decisions, our new client returned to normal operations after acquiring our financial services. Meritus facilitated the growth of this company back to over $5 million per year. As a result of the exceptional customer service and financial resources we provided, this company experiences consistent growth and security regardless of seasonal staffing requirements.
Oil & Gas
Urgent Oilfield Factoring Need in West Texas Solved
An oilfield equipment rental company had a problem. Due to some miscommunication with a client and his current factoring company, the factoring company stopped all funding, access to reports, and started collecting out the balance on all payments that were coming in. The oilfield rental company was in growth mode and with no cash flow now was in a tight spot as equipment needed to be built, payroll to be made, vendors to pay and orders to be filled.
Meritus Capital took time to understand the situation and was able to complete the buyout and provide the following:
- A better rate
- A higher advanced rate
- Give more room to grow with a higher maximum line
- Expedient Customer Service
Only a few months later we have seen our new client's accounts receivable almost double and they are now positioned for continued growth.
Growth in the Permian Basin Causes Need for Additional Capital
Our new client, a hauling company in the Permian Basin, came to us with a problem that we see again and again:
- Their current factor was maxed out and unwilling to listen to their client's requests and needs
- They were experiencing rapid growth in the oil fields in West Texas
- They did not have the available capital to meet demand
Would this client stay stuck in their current situation, or could they find a way to successfully take advantage of their extremely rapid growth and requests from new customers. Meritus was able to help by providing our new client with a $6.5MM funding and $10MM max LOC, giving them in addition:
- A much lower rate without the extra fees
- More flexible customer service
- No requirement to factor all their invoices
- In the rapid, urgent manner they needed it
Transportation & Logistics
Cash Flow to Fund Purchase of All New TrucksChallenge: The CEO of a domestic transportation company needed increased cash flow from his Accounts Receivable to partially fund the purchase of all new trucks. His customers required higher quality trucks to handle premium loads heading primarily to Mexico.
Solution: Meritus provided a $2,000,000 Line, which enabled them to get the capital they need. The company can now meet demands for the most difficult load request and has increased business substantially with a larger presence not only in the USA but also in Mexico.
More Flexible Funding RequiredChallenge: The CEO and former CPA from one of the top accounting firms in the country required more flexible financing than their current bank. They expressed sincere dissatisfaction with their current bank LOC that was not meeting their current needs. They needed aggressive pricing to provide the additional capital to fund the current payroll demands and do a bank buy-out. The company had additional complications with several of their divisions and accounts payable/debt issues.
Solution: Meritus provided a $5,000,000 A/R Factoring Line giving them plenty of growth potential, paid off their bank, and provided an immediately available extra stretch piece of capital to meet the current staffing demands and increase the customer base. Our Meritus Team worked through some difficult challenges and complications to get the first funding done and to the satisfaction of the client. The company is now positioned to receive more government contracts and customers. With our funding, they can attract the staffing personnel they need for their niche markets, and have the freedom and flexibility to maintain steady growth.
Capital Needed to Fund Future GrowthChallenge: A CEO who formerly ran a $600MM operation had an opportunity to purchase a fairly significant janitorial company that was teetering on the brink of bankruptcy. The problem was that the current ABL lender wanted out and they needed the capital to buy them out and fund future growth.
Solution: Meritus provided a $500,000 A/R factoring LOC plus plenty of room to grow the line. Owing to our deep capital markets and M&A experience we had ability to understand the transaction and offer a structure that would enable us to leverage the appropriate target Accounts Receivable assets of the company being purchased. The company is now positioned for growth and can now target large contracts that we can finance.
Bank Line and Additional Funding for GrowthChallenge: Our new client has an excellent track record of providing office supplies, equipment sales and servicing to schools and city government customers. Business is strong and their bank would not increase their current line of credit to provide the necessary capital to take on the new opportunities being presented. They needed the ability to smooth out cash flow and allow time for this sectors traditionally longer payment terms.
Solution: Meritus provided a $2,000,000 A/R Factoring Line that immediately provided them added liquidity. We also coordinated an Intercreditor agreement with their bank which enabled the client to get the cash flow needed for their existing and future clients. Our Meritus Operations Team visited the client and worked out in advance all the specific needs this client required to keep their current internal office and external customer processes working smoothly during the funding transition. They were able to keep their bank line in place and still access our funding to fuel their growth. Another happy client, we love our job!
Factoring Line to Support New Business ModelChallenge: Our client started a new company with a business model that was completely different than his existing business. The Newco is a wholesale distribution company of tool products that ships its products directly from India to the buyer in the US. Our client needed funding after the shipment left the port in India. He needed to keep his existing business separate due to the different model types and high growth potential of the new program of direct manufacturer to buyer.
Solution: Meritus provided a $1,000,000 A/R Factoring Line plus plenty of room to grow the line and provide the cash flow needed to increase his customer base and grow this side of the business. The company is now positioned for growth and can now target more contracts that we can finance.
Fast funding keeps government contractor runningChallenge: A government contracting client came to us in dire straits. The current bank funder was closing their line of credit because the company’s CPA-audited financial statements were extremely late. Their CPA and Accountant were in the process of getting these statements and reorganizing their back office, but had run out of time. This client was doing $750K – $1.5 mil a month in sales with future growth potential to $3-5 mil a month. They also had multiple partners and agreements in place along with UCC filings. We had to work through these challenges quickly so we could get them on board with new funding in place, satisfy their government contracts, and keep the doors open.
Solution: The Meritus Team immediately jumped into the situation with both feet, ready to work through all the obstacles and get to a solution. Our negotiation made the buyout with the other funder seamless. All additional paperwork, documentation, and transfer of required information was coordinated both swiftly and thoroughly by being sure the right players from both sides were involved at all stages of the process. This put the company in an even better position than when they started out. They are now successfully funding their business, anticipating growth from additional government contracts coming down the pipeline, and looking forward to expanding their business revenues and profits.