A Business Owner's Catch-22

The lead story in the NY Post’s business section this morning tells of a NJ business-owner who can’t get a loan from his bank.

“Where’s the news in that?”; you might ask.

Well, it’s not news, as we all know. The point of the Post’s article is the bank’s motivation for turning down the owner's loan request.

The article does bring up a very important point, though, because it specifically identifies the proposed USE of funds and the “Catch 22” nature of the owner’s situation.

The business featured in the article is 23 years old, profitable and grew by 16% last year!

The owner needs financing to hire additional salespeople. If he could add the staff he could increase his sales even faster but, and here’s the issue of course, he can’t hire the people without the cash to make the payroll.

This is a successful business that can become even more successful, but it can’t add sales staff because the new sales revenue will lag the payroll cost.

This is exactly the kind of situation that needs an asset-based solution! It’s not a problem business, it's a good business with a problem. It needs to accelerate cash receipts.

The owner could very likely establish a relationship with a factoring company allowing him to sell enough of his accounts receivable to generate the cash needed today to hire the new staff he wants.

This could be a temporary arrangement, funding the added payroll until the sales made by the new staff begin to generate the cash flow to support them. Or, it could become a longer-term part of his overall cash management and business growth strategies. Both options are available in the factoring market.

It’s just not necessary for an established, profitable and growing company to give up the opportunity for even faster growth because the banks are not willing to lend.

There are other solutions!

The Interface Financial Group has been helping businesses with their cash flow needs since 1971. Solving cash flow problems is what we do.