Estimated reading time: 2 minutes
Background
Credit facility limit:
$4,000,000
General description: Government facility support services
State of formation:
California
Customer type:
United States Navy
Issue
This California-based government contractor provides operations and maintenance support for the U.S. Navy and specializes in marine operations, facilities, utilities, and transportation. Our customer has had consistently achieved revenues greater than $60MM and has maintained a strong historical financial performance however, the company wished to transition away from its current institutional revolving line of credit in favor of a more elastic credit facility to support it’s growing working capital needs. Its management team recognized the necessity to change capital providers ahead of its projected growth in 2024 and find a financial partner whose leverage covenants wouldn’t limit its potential for strategic contract growth.
Proposed Solutions
United Capital Funding (“UCF”) proposed an asset-based, accounts receivable financing facility; which delivered a highly flexible working capital structure that is sufficient and flexible enough to grow along with their current increasing demand. Through this form of financing, the company was able to:
- Receive advances against earned but unbilled accounts receivable to support new rebadging contracts or contracts that require substantial new onboarding of FTE’s and therefore, increased payroll costs.
- Secure an adequate credit facility collateralized by their accounts receivable; then they could have otherwise achieved by leveraging their current balance sheet under their existing traditional revolving line
of credit. - Increase liquidity to support contract demand without raising dilutive equity capital.
- Expand at an integral part of the company’s life cycle without restrictive covenants.
- Decrease their overall Days Sales Outstanding by working with an institution that has been in business for 25 years supporting its customers with professional receivable management services.
- Reduce senior management’s time and energy on cash flow management and therefore, allowing greater attention on growing revenues and ensuring customer satisfaction.
Conclusion
We’re pleased to announce the company onboarded with United Capital Funding just prior to year-end; allowing for them to commit to its customers their ability to execute on their growing pipeline. Due to management’s decision to make this shift in their working capital structure, our working capital solution achieved the company’s goal of becoming self-sustaining with a flexible form of working capital. By working with UCF, our customers almost always gain the additional working capital necessary to support continued growth and seek additional business in new verticals and markets.
Connect with United Capital Funding