How Liquid Capital Helped One Company Navigate Financial Challenges with Invoice Factoring

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How Liquid Capital Helped One Company Navigate Financial Challenges with Invoice Factoring

 

Short on time? Read this 30 second summary

One manufacturing company founded in 2003, enjoyed steady growth until the 2009 economic downturn. Despite winning a large contract from a major grocery retailer, the company faced a cash flow problem when a large Canadian bank pulled their line of credit, leaving them classified as «not bankable» by traditional banks.

Turning to Liquid Capital for assistance, it received quick cash through invoice factoring, with $1.2 million made available over the course of the contract. This funding helped it maintain operations and deliver on the big order. By 2024, the company regained bankable status and achieved sales growth, emerging stronger from the partnership with Liquid Capital.

 

Case Study: How Liquid Capital Helped One Manufacturing Company Navigate Financial Challenges with Invoice Factoring

Business goes in cycles. During good times, it can feel relatively stress-free. Then something unexpected happens and you now have some serious problems to solve. Let’s talk about how one company navigated the economic storm of 2009.

When challenges come, it takes more than vision. You need great relationships with people who are willing to spend effort to help you out.

Founded in 2003, the company enjoyed steady growth for its first 6 years, but the 2009 economic downturn brought challenges that threatened the business.

 

Cash Flow Hits a Wall

In 2009, the economic recession hit, forcing everyone to take stock of things and make some tough decisions. The company faced two options: cut costs and reduce their workforce, or take an aggressive approach to capture market share while competitors played it safe. The company chose the latter, increasing sales and overhead in hopes of capturing market share. It was a bold move, but one that’s helped lots of companies thrive during tough times when everyone else is bearish. 

And the approach worked. They landed a big project from a huge grocery retailer. But it didn’t work fast enough.

 

«[The client] came through the door with good relationships, good business practices and a solid contract in-hand. He was clear about his situation and didn’t hide anything or make me guess. It made him an ideal client, and we were able to help.»

– Liquid Capital

 

As successful as they were, they had a cash flow problem.

To make matters worse, despite winning this huge contract, their bank pulled their line of credit. It wasn’t personal; it’s just how banks are structured. They lack the ability to handle non-standard situations.

The company’s efforts to restore their credit line failed, leaving them without necessary funds and classified as “not bankable” by traditional banks.

Ironically, it was now practically guaranteed money to continue operating via the large contract. And now they can’t get the funding to fulfill the contract and keep the doors open.

Timing is everything, and they found themselves out of time.

Invoice Factoring

Turning to another business bank in Canada for assistance, the company was directed to Liquid Capital. Here, Dan from Liquid Capital knew time was important. And he didn’t let the grass grow.

Dan handled initial research and underwriting within a month. Once this was done, they were set to receive funds within a day of sending out their invoice, making $1.2 million available through invoice factoring over the course of that contract. This immediate cash helped the company maintain operations and deliver on their big order.

And what’s more, once that initial underwriting was done, Dan could now buy any invoice under that contact, giving them cash the next day.


Process Overview:

  1. Initial Assessment: Liquid Capital assessed their financial status and operations, and ran credit on the company’s customer.
  2. Invoice Factoring Implementation: They began getting cash for their invoices. Cash flow improved the day after invoice submission.
  3. Consultative Support: Dan helped them over many hurdles, offering strategic advice, based on their strengths to overcome other times of turbulence in the company.

Today, the Company is “Bankable”

Businesses run into cash flow problems either from bumps in the road or the need for rapid growth or both. And when banks can’t help, Liquid Capital offers cash flow strategies that don’t just get you by today, but position you for the future.

They did their part and kept their eyes on the larger vision. With the help of Liquid Capital, they were able to stabilize and become bankable by 2024.

Results and other milestones:

  • Reaching Operational Stability: The funding enabled the company to continue production, pay suppliers, and avoid mass layoffs during a critical period.
  • Navigating COVID: During the COVID-19 pandemic, they faced severe supply chain disruptions. The existing relationship with Liquid Capital allowed them to manage these challenges effectively, ensuring financial stability and operational continuity.
  • Recovering Financially: By 2024, they regained “bankable” status, meaning they’re easy for banks to lend to, partly owing to their sales growth. The partnership with Liquid Capital helped the company navigate financial instability and emerge stronger.

Insights and Recommendations

According to the company’s CEO, the keys to making his way through the difficult realities of business are the following:

  • Vision and Transparency: Maintain a clear vision for the business and be transparent with financials to build trust with financial partners. This transparency was key to their ability to secure necessary funding.
  • Persistence in Communication: Consistent communication with suppliers and financial partners is vital. Its persistence helped maintain supplier relationships and secure financial support.
  • Networking and Relationships: Building a strong network of relationships can provide crucial support during challenging times.
  • Consultative Financial Partnerships: Working with a financial partner who offers consultative support can turn business strengths into actionable financial solutions. Dan’s approach at Liquid Capital exemplified this, helping the company transform their financial difficulties into manageable challenges.

Vision Paints the Picture. Friends Make It Happen.

The company’s journey shows the benefit of strategic financial management and the value of strong partnerships. 

Liquid Capital’s invoice factoring solution helped them overcome financial challenges and continue on a path of growth. Leadership, clear vision, strong relationships, and consultative financial support helped them navigate bumps in the road and get to a much stronger financial position.

Up next: Serna’s Trucking: Driving results within the construction industry

Building Your Business with Smart Financing: A Guide for Business Owners

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Navigating the Financial Landscape as a Growing Business

In business, growth requires capital.

You can have great processes, a great idea, and killer logistics. But if you don’t have capital, nothing moves.

Whether you’re looking to expand your operations, invest in new equipment, or simply manage cash flow during busy seasons, finding the smart financing solution can make all the difference. But with so many options available, how do you choose the best path for your company?

Let’s talk about financing options for small and medium-sized businesses (SMBs), with a special focus on invoice factoring – a flexible solution that’s helping many B2B companies overcome cash flow challenges and fuel their growth.

Your Financing Options

Before we look at specific solutions, let’s review some common financing options available to SMBs:

  1. Traditional Bank Loans:
    • Pros: Often offer lower interest rates for established businesses with strong credit.
    • Cons: Can be difficult to qualify for, especially for newer or less established businesses.
  2. Business Lines of Credit:
    • Pros: Flexible, allowing you to borrow only what you need.
    • Cons: May have higher interest rates than term loans and can be challenging to qualify for.
  3. SBA Loans:
    • Pros: Government-backed loans with favorable terms.
    • Cons: Application process can be lengthy and requires lots of documentation.
  4. Equipment Financing:
    • Pros: Allows you to purchase necessary equipment without a large upfront cost.
    • Cons: Limited to equipment purchases and may have higher interest rates than traditional loans.
  5. Merchant Cash Advances:
    • Pros: Quick access to cash based on future credit card sales.
    • Cons: Can be expensive and may impact cash flow.

The Cash Flow Crunch

Between when you invoice and when they pay, you still have bills.

This gap between delivering and receiving payment can create problems:

  • Difficulty covering operational costs
  • Struggles with making payroll
  • Missed opportunities for growth or expansion
  • Inability to take on new clients or larger projects

When other financing options aren’t available (or are just impractical), invoice factoring may be able to help.

Invoice Factoring: A Closer Look

It’s like financing, but not exactly.

In other words, you sell your invoices. So you’re not carrying debt.

Invoice factoring lets you sell your outstanding invoices to a factoring company at a slight discount.

Here’s how it works:

  1. You complete work for your client and issue an invoice.
  2. Instead of waiting 30, 60, or even 90 days for payment, you sell the invoice to a factoring company.
  3. The factoring company advances you a majority of the invoice value (often 80-90%) within 24-48 hours.
  4. Your customer pays the factoring company directly when the invoice comes due.
  5. Once the invoice is paid, you receive the remainder of the invoice value, minus the factoring fee.

Benefits of Invoice Factoring for SMBs

  1. Improved Cash Flow: Get paid for your work almost immediately, rather than waiting weeks or months.
  2. Scalability: As your sales grow, so does your access to capital.
  3. No New Debt: Unlike loans, factoring doesn’t create new debt for your business.
  4. Easier Qualification: Approval is based more on your customers’ creditworthiness than your own business history.
  5. Outsourced Collections: The factoring company handles collecting payment from your customers.

Is Invoice Factoring Right for Your Business?

Invoice factoring can be particularly beneficial for:

  • B2B companies with longer payment cycles
  • Seasonal businesses needing steady cash flow
  • Growing companies that need capital to fund expansion
  • Businesses that have been turned down for traditional bank financing

Building Long-Term Success with Smart Financing

When you’re small, you may not have a finance department within your business. It might be up to you to understand the big picture and know your options.

Too many businesses limp from one short-term financing option to another without planning their path.

Protip: Start with the end in mind. As you’re thinking about financing options, make sure you’re still coming out ahead, so you’re building your way toward better financing options.

  1. Understand Your Needs: Clearly define why you need financing and how you’ll use the funds.
  2. Plan for the Future: Choose financing options that can grow with your business.
  3. Compare Costs: Look beyond interest rates to understand the total cost of financing.
  4. Build Relationships: Work with financial partners who understand your industry and business model.
  5. Stay Flexible: Your financing needs may change as your business evolves, so remain open to new options.

Operating Capital Builds Your Business

Growth often comes down to the right financing at the right time.

Whether it’s traditional bank loans, invoice factoring, or a combination of financing options, the goal is to find solutions that give you the capital you need while supporting your long-term business objectives.

Remember, smart financing isn’t just about solving immediate cash flow problems – it’s about lining up your financing plan with your vision for sustainable growth.

Think through the options, including invoice factoring, and then talk to someone to get guidance toward the smart financing solutions for your business.

And contact us if you want some help thinking this through for your situation.

Recent Fundings – July 2024

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Recently, our invoice factoring funding solution has helped businesses in a variety of industries meet payroll and support their day-to-day operations.

See our recent fundings below:

Liquid Capital Recent Fundings July 2024 Overview

 

Why choose Liquid Capital?

Liquid Capital is a full-service working capital and trade finance company. We have the largest geographic footprint of alternative funding professionals across North America, offering clients a customized and flexible approach with local decision-makers. We offer a complete range of solutions for all industries and provide immediate financing upon approval with no long-term contracts or hidden fees. 

 

Need funding? Contact your Liquid Capital Principal today.