Wholesale Distributor Increases Inventory with a Secured Line of Credit

Background

An entrepreneur owns and operates a company that distributes discount goods and beauty products with annual revenues around $15 million. The entrepreneur won new state and government contracts, and orders must be filled within 30 days. The average accounts receivables cycle lasts 90 days.

The Need

The business owner needed financing to purchase excess stock and bridge the gap between the inventory purchase and payment.

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, accounts receivables and personal credit of the owner.

A line of credit gave the business the ability to increase the inventory immediately after the contract was awarded. The owner only had to pay interest on the portion of the credit line used. A term loan requires interest payments on the full loan amount. Therefore, even if the owner over estimated demand for the product and didn't use the money, they would still have to pay interest back.

Also, Biz2credit emphasized the strength of the case to win the best term. After packaging the case and highlighting the solid accounts receivables, Biz2Credit received competitive rates from two lending institutions. The owner received a credit line at Prime Rate.

Results

• Received a $200,000 line of credit of within 30 days
• Line provided at Prime Rate
• Serviced orders on government contracts

Benefits

• Strengthened future capital access for company
• Used financing to increase a dedicated sales agent
• Used financing to improve the company Web site and branding
• Improved positioning government contracts over $1 million a year