• Richard Gusmano

The Right Guidance is NECESSARY when pursuing BOTH a Line of Credit AND Term Loan Program

Updated: Jan 6

Actual Case Study:

We were introduced to a Media/Marketing firm that had approximately $250,000 in B2B Accounts Receivable from solid debtors, net operating income of over 150k on a top line (annual gross sales) of approximately $2M. The owners both had strong credit, had separate debt on the balance sheet from purchasing the business from a prior owner (300k- no UCC filed), and mentioned that they were in growth mode.

Our recommendation was to secure an Asset Based Line of Credit with the receivables as the borrowing base and allowing growth (and the expanding borrowing base) to cover their immediate and future cash needs.

The client did not follow our suggestion, mainly because they didn’t like the ABL lenders insistence for Dominion of Cash (Control Account) on incoming payments. Instead the client asked us to arrange a loan - which we did (7.75% over 120 months), even though we mentioned that lending/collateral guidelines make it MUCH easier to have a Line of Credit in place first- then arrange a loan on the remaining available collateral.

Subsequently, the client has been in contact several times requesting a line of credit to address growth, and to pay down the debt to the prior owner. Being that the AR is encumbered by the UCC filing of the loan, and we are not able to have the bank parse out the AR with an intercreditor agreement, the client has struggled with debt service- even though the business is doing quite well- on paper.

We can likely secure a larger loan for the client- but they will need to post personal collateral- which they don’t wish to do. Understanding the right credit products- and when to implement them- is an integral dynamic when trying to grow your Business.

At BCCUSA we will explain exactly what your Business is eligible for and why.

BCCUSA: Know before you Borrow



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Medford NY 11763

Tel: 631-458-0100

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