Client Case Example #2
Profile
Privately held, $40M contractual healthcare staffing business interested in exploring a valuable exit.
Situation
The business had lost its line of credit with their bank and had entered into a factoring relationship. The factoring contract was nearing maturity and the Owner hired one of our CFOs to evaluate strategic financing options for the business in light of the fact that he was planning on significant growth within the two year planning horizon.
Actions Taken
Our CFO worked closely with the Owner and the senior management team to prepare a two year monthly forecast detailing the anticipated growth. We then stressed the model with various financing alternatives and determined that the business was bankable. We prepared a funding presentation and ran a process including three commercial banks and the incumbent factor.
Results
Our CFO helped the business secure a $4M working capital line of credit against the accounts receivable and replaced the factoring relationship entirely, reducing the effective cost of capital from 22% to 5.5% and saving the business over $550K in financing costs per year. The two year forecast prepared indicated that if the Owner left the increased profits in the business, they would self-fund the growth and be sufficient to pay the line of credit down to zero in 18 months. Two years later, the business achieved the forecasted revenue growth and the loan of credit was reduced to zero in month 19, yielding the Owner a $40M business that was debt free with a $4M line available.