One of our best clients is a marine engineering firm which was once considered a risky bet by its bank manager.
It didn’t take long to discover why the bank was leery about helping out.
The company was just a few months old, it had only one customer and the owner had sunk all his available cash into setting up the business.
On the bright side, the sole customer was a multinational which had hired our client to carry out on-going repairs and maintenance to a large industrial facility.
The first invoice for $230,000 had been issued.
The not so bright side was that the multinational’s payment terms were 30 days.
In A Bind
That left the owner in a bind. He had no working capital left to pay staff and meet overheads which were quickly mounting.
We deal with this scenario a lot and have become quite used to providing invoice finance for start ups in this situation.
The first and most important thing we do is confirm that the services outlined in the invoice have been delivered and the debtor is happy to pay – albeit according to its own time frame.
In this case, the project managers of the multinational were happy to confirm by phone that the work had been completed.
The staff in the accounts section provided us with a screen shot of the accounting software that gave us the exact amount of the payment and when it would be paid.
That gave us enormous confidence that the risk wasn’t as great as the bank manager imagined.
A credit check of the owner of the company produced a clean slate and a few phone calls produced some glowing reviews.
On that basis, we were able advance the company $180,000 which covered all its needs.
The owner of the business was overjoyed that we were able to provide him with what amounted to a fast unsecured business loan so quickly.
At the time of writing, we have been dealing with this company for three years.
In the beginning, it used our services every month to keep its head above water. but as time has passed, it has won more contracts and its cash flow is running smoothly.
Only In Emergencies
Now, we are called upon to help out only in emergencies and the amount of money required is nowhere near what it was in the early days.
In a recent interview about his business the owner, David, said this about us:
“Initially it was regular, but now that we are more established we require them less and when we do borrow, the period of time that we borrow against an invoice is shorter.
“We only deal with Paul and we’ve received excellent service. They do whatever they say they will do and we’ll continue to have a long working relationship with them, even though we might not use them all the time.”
Without the cash flow our facility provided this company might have stalled and crashed.
It’s a classic example of how it possible to grow your business by factoring invoices. For further information click on the link and watch the short video.