Too many times, businesses come to us who were previously offered 2nd, 3rd, 4th (or more) positions on top of their current financing. A few things in regards to this:
1. This additional position rarely satisfies your immediate working capital need
2. It dramatically increases your cash exposure on a daily basis
3. These positions are usually really short and expensive
4. Often serves as cash payments to your existing loans, not usable for the business
I could go on and on about why this happens, but let's focus on solutions around the proverbial "hole" that can be avoided. We need to dive deeper into the true annual cash flow of a business and turn our focus to what would be better for our customers long term. We consider our financing to be an investment into our customers; so, their financial stability drives our decision making. Is our money "safer" if we increase your current payments by 20% or decrease them by 20%?
Here is a deal we funded this morning that you might find interesting:
Problem: Owner had 3 current loans and was offered a $60K 4th position deal from two other companies, which were very short and expensive
Solution: We agreed to buy out $110K on 2 of 3 current positions and provide another $230K for working capital - total of $350K
Result: Now their daily payment is 22% lower than it was including the $230K new money!
There are ways to avoid digging a "hole" for your business, so you should align yourself with a partner that not only thinks long term, but can execute on your behalf.