Over the years, Innovative Financing Solutions (IFS) has helped many small businesses obtain access to capital that would often have been unavailable to them under conventional lending guidelines. These businesses have gone on to create jobs, stimulate the economy and provide valuable products and services locally, regionally, nationally and even internationally. An example of how one of IFS’ small business clients took full advantage of its growth potential was the result of using a series of SBA 7(a) term loans and a conventional line of credit provided by an IFS partner lender.

Several years ago, we were approached by a business owner in the medical equipment industry serving the home care market. The business was growing rapidly due to a recent exit by a large competitor, but the company had insufficient capital available to continue growing on its current trajectory. Much of the company’s problem was due to an overly burdensome debt position – comprised of short-term, high interest debt. In addition, the company’s primary source of revenue came from insurance billings, which have an average cash conversion cycle of 90-120 days. As a result, the little working capital that was available was quickly used to support current debt service. The company was treading water and unable to hire necessary employees, purchase additional equipment/inventory, and procure other necessary resources to support growth.

We quickly determined an SBA 7(a) term loan was the right fit. The first round of financing provided a complete debt restructure which decreased annual debt service by 62% per year. In addition, the company was provided permanent working capital and new equipment/inventory financing to implement planned expansion efforts over the next 12 months. Within one year of this debt restructure, the company increased its employee headcount from 28 employees to 48, relocated its headquarters, added an additional location and expanded its customer footprint from five to ten states! This in turn supported sales and net profit growth of 44% and 100%, respectively!

The company returned to IFS and the partner lender after this successful first year following the initial SBA loan closing for additional help. Due to the specialized nature of the equipment the company sells and the associated manufacturing process required to build this equipment, there were few vendors manufacturing the equipment the company leases. The company requested additional funds to vertically integrate the business model to include manufacturing its own equipment.

A second SBA 7(a) term loan financed the initial start-up of this manufacturing subsidiary, which subsequently produced 75 new equipment/inventory units for the company and reduced direct costs significantly. It also decreased the time to procure new equipment. To facilitate this strategic shift, a companion Conventional Line of Credit was provided to support the short-term working capital needs of the company.

The company’s growth trend has continued and today we are proud to support this small business and other small businesses in a similar capacity.

If you are a small business owner in need of financing or are a lender that has a small business in need of financing, but you are unable to utilize conventional financing means, contact the experts at Innovative Financing Solutions for a free consultation.

By: Christopher A. Meccariello
Chief Operating Officer