CASE STUDY: Restrictive bank financing held back this IT staffing company


Estimated reading time: 2 minutes

Background

General description:
Information technology (IT) temporary staffing company

Customer type:
Government entities including the United States Department of Housing and Urban Development, United States Postal Service, and General Services Administration


Companies that benefit from factoring of government receivables may be contractors for federal, state or county contracts. In many cases, minority and women-owned businesses and SBA 8(a) organizations are eligible to factor government receivables.

When working with the Federal Government, any receivables funded must follow the guidelines set forth in the Assignment of Claims Act and the processes set forth in the Federal Acquisition Regulations. United Capital Funding provides the necessary tools and resources in house for these processes.

Issue

The company was not able to expand due to restrictive financing from a traditional bank. The company was constantly bumping up against the credit line maximum imposed by the bank. At the same time, the bank continued to impose stricter loan covenants, making it nearly impossible for the entity to expand.

Proposed Solutions

United Capital Funding proposed its factoring services to alleviate the road rash associated with hyper growth. Factoring would provide the following benefits:

  • Advance on the invoice amount (typically 80% of the invoice value)
  • Comprehensive accounts receivable management and maintenance of payment recovery and outstanding invoices.
  • Credit investigation of future customers
  • Online reporting available through CADENCE

Conclusion

The company accepted the proposal and was approved for factoring with United Capital Funding.

In five days United Capital Funding paid off the bank and freed up more than $500,000 for the company. This approach provided the company with the ability to procure new government contracts without having to be concerned that they may not have enough capital to meet payroll requirements.


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