Estimated reading time: 2 minutes
Background
Credit facility limit:
$8,500,000
General description:
Education and training support
State of formation:
New York
Customer type:
U.S. Department of Labor
Business Challenge
This New York-based government contractor was engaged in a multi-year agreement with the U.S. Department of Labor, focusing on education and training support. However, new regulations significantly raised operational costs, resulting in the company’s first-ever historical loss.
Unfortunately, this recorded loss prompted a sudden withdrawal of support from their bank and traditional line of credit, leaving the company without a financial safety net. To alleviate financial pressure while waiting for a modification to their existing contract—an adjustment that could take several months—they needed liquid capital.
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 achieve by leveraging their current balance sheet under their existing traditional revolving line of credit.
- Increase liquidity to support incoming 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
The partnership forged with United Capital Funding did more than just meet the company’s immediate financial requirements. It set the stage for enduring prosperity through enhanced cash flow management
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