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Benchmarks/options for Working Capital financing?

We are a $15mm - $25mm revenue technology and services company looking to spend ahead of new sales. We have an offer for a $2m working capital line based on our A/R. We probably need about $1m over 12 months then will be cash neutral. I have 2 main questions: 1) are there any other options that people have used for this kind of financing? The amount we need is too small to raise equity and I didn't think that debt was the option because the amount we need will vary. 2) What are considered to be 'good' terms? There is an upfront fee plus minimum monthly interest. Thanks

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

ABL is a viable alternative for financing.

What you need to do is shop around for the obvious; lowest interest rate, lowest monthly fee, caps or low additional fees (and this is a way they get you), explicit terms vis a vis what is a concentration, foreign sales, over x day terms, prepayment penalty, etc.

Especially important is how they calculate your available limit based on A/R. Make sure both you and the vendor understand your business and industry (while yours may be standard, there are companies I've been in that are not standard), so everyone is on the same page.

When you find the best deal (and have vetted the company) my advice is only borrow (take down from your line) exactly what you need and not a penny more.

Since your rate will be well above bank rates (and I've seen them as high as usury allows and with fee's above that rate effectively) you want to be able to eliminate the line and move into a bank.

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