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IT Networking Company Expands Business with a Secured Line of Credit

Background

An entrepreneur owns an IT networking company with growing annual revenues around $2.5 million for 2006. The company is headquartered in Europe with a branch in New York. Every time the company needs to finance business expansion, the entrepreneur wires money from Europe to New York.

The Need

In order to keep up with growing demand, the owner needed capital to fund new projects and add new clients.

Wiring money from Europe proved to be a time consuming and an expensive way of financing expansion plans. Bringing in capital from European operations (tax disclosure, etc.) required extensive paperwork.

Small Business Loan Solution

After reviewing the business and personal financials of the entrepreneur, Biz2Credit recommended taking a line of credit against the strength of the business and personal credit of the owner. Biz2Credit surveyed various lending options and zoned in on two lending institutions. Although the lenders offered an interest rate of prime, Biz2Credit challenged them to come up with better terms, since the entrepreneur would open an account with the bank servicing the debt. The lenders reduced the interest rate to prime minus 0.5 and offered lower cash management fees than the entrepreneur's current bank.

Results

  • Received a line of credit of $200,000 within 20 days
  • Improved flexibility to expand customer base when demand arose and avoided paying interest in the interim

Benefits

  • Additional working capital to service larger contracts
  • Higher projected annual growth rate of over 20 percent
  • Ability to staff for new project
  • Increased annual revenues by over $200,000
  • Increased bargaining power and market penetration as a high volume buyer

The lenders reduced the interest rate to prime minus 0.5 and offered lower cash management fees than the entrepreneur's current bank.

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