| Case Study: Refinance Expensive Term Loans |
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Wholesale distribution company refinances an expensive term loan with a $500,000 line of credit
Biz Profile
An entrepreneur’s wholesale perfume distribution business experiences an annual growth rate of 50 percent. Every quarter, the company generates $500,000 in accounts receivables. For the best supply deal arrangements the business owner must pay upon receipt of the goods, and at all times the entrepreneur needs enough inventories for about 30 to 60 days.
Financial Need and Obstacles
The small business owner wanted to expand the product line and service high volume orders from department stores. With additional working capital, the entrepreneur could import perfumes in bulk and conduct business with larger clients that have longer payment cycles. A pre-existing term loan for $250,000 put a blanket lien on the business and prevented additional financing options.
Outcome
By replacing the high cost term loan (12
percent rate) with a line of credit of $500,000
secured by the company’s accounts receivables
and inventories, the owner:
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