Case study #3: Partnering with a bank to help a business client.
Client: A machining company and hydraulic parts distributor.
Situation: The majority owner wanted to retire and sell the company to a 29-year employee, the General Manager and Vice President of the firm, whose management style had contributed to the overall success of the business. His loan request was three-fold: 1) $4MM stock purchase of business, 2) $600K owner-occupied real estate, 3) $500K operating line of credit. The General Manager began to negotiate the purchase and entertained a financing solution with both large and community banks. The community bank that ultimately earned their business realized that the request would exceed its comfort level and partnered with Cash Flow.
Solution: Cash Flow provided a $1,800,000 accounts receivable facility with aggressive pricing and a 90% advance rate. The facility was initially used to fund the buy-out then as an ongoing working capital solution. We also helped solve challenges inherent in the unusual deal, such as: with new ownership, should the company be underwritten as a start-up, or a continuing business?
Result: By including Cash Flow as a funding partner, their local bank minimized their exposure, provided a complete business solution and received non-interest income from the referral on a monthly basis.