This is a quick look at a real-life application to Alternative lending and an example of how, if used properly with ample planning, will remove the usual inhibitions businesses face in taking the next step into growth. This will show how they properly managed healthy debt and stimulated much-needed growth for the business.
The Problem
M&M painting is a commercial and residential painting company with a healthy pipeline of projects. In their current position, they were only able to do one or two sizable projects at once with their size and infrastructure. Always keeping enough in the business checking account they were able to handle these jobs with minimal cash flow issues.
The problem is, they were restricted to this size and often turned down extra work that couldn’t be fulfilled solely due to lack of infrastructure and proper financial planning. They could not handle the volume. The cashflow always floated at the same safe level but never had any true increase. They made money and they spent it, It was a sustainable business. Turning down jobs meant turning down opportunities for growth, and growth is in the best interest of an American business.
“Just because a boat is floating, doesn’t mean its sailing” -Bruce Leybel
The Solution
Their solution is clear. Expand the infrastructure to be able to handle the demand. Create a relationship with someone who would be able to provide them enough funds to buy more trucks, hiring more workers, purchase more materials up front, and back them in the process of being able to handle the volume of work.
Their credit wasn’t in the best shape. Traditional banks wouldn’t look past their low score, and usually had the owner “waiting for the banker longer than the time spent talking to one.” Banks were not even close to an option.
The Owner of M&M turned to an Alternative Lender, Cast Capital, a financial entity separate from the banks, able to lend money at different parameters. Parameters that are less risk-based and more potential based. Since M&M has healthy job flow, Cast Capital can be assured that they will continue to create revenue. They can also be sure that with enough capital to expand the ability to do more jobs, M&M’s revenue will increase. Even though their credit score suffered, they were still able to qualify for the capital needed to take the next step.
M&M took a cash loan of 75k, bought two more trucks and hired six more workers, effectively doubling their capacity to do more jobs, and doubling their potential for revenue.
While that 75k goes into effect, they start the credit repair process with Cast Capital’s credit repair department. Payments are being made against the 75k and the relationship between lender and borrower is flourishing. Not only are the alternative lenders satiating his current needs for the business, but they are setting him up for his future needs to be even more easily approved for more dynamic programs with better rates.
The Pipeline is full of jobs, the AR is healthy, and the relationship is being kindled between a private alternative lender and a successful American business. Over the course of a few months, M&M was able to repair their credit and get approved for a 50k line of credit. Now, if the business at any point, needs an extra kick for expansion or to aid a slow season, they have immediate access to working capital and a dedicated Lender to back them with any endeavor.
Matthew Elling EXEC VP
201-515-5563 EXT 102