The Cincinnati-based medical supplies company was on a roll. The owner/president had left a lucrative sales position with a top-tier healthcare products manufacturer four years earlier because he’d found a part of the market – a niche – he believed he could serve well.
He was right.
His small company (14 employees) was fast becoming a “go-to” source for about a dozen products that were in constant demand at hospitals and medical equipment distributors across the country. Its prices were competitive, its sales force was knowledgeable and, most importantly – its products were made to precise standards that were respected throughout the industry.
A Rare “Growth in Business” Opportunity
A regional healthcare system headquartered on the west coast called the president and asked him to attend a bidders’ conference for a multi-year, multi-facility contract that would involve the production of several custom-designed components.
It quickly became obvious to the owner, based on the supplied specifications and information obtained at the bidders’ conference, that his company could design and deliver the part. “I talked to a couple purchasing managers after the meeting,” said the owner, “and it was clear that based on our reputation and what we had supplied to them previously, that they wanted us to get the contract.”
All of which was great, except . . .
The Problem: Timing Presents Cash Flow Problems
To deliver the products – if the contract were awarded – would require immediate, substantial investments in new equipment. According to the operations manager, a new machine would be needed, at a cost of about $320,000. In addition, a machine already on site would need to be upgraded and refurbished, to the tune of about $40,000.
“If it had been a year later, we could have bought the new machinery with no trouble,” said the owner. “But we were absolutely stretched when this opportunity dropped in my lap.”
The company’s credit lines were nearly tapped. Banks were hesitant to lend without collateral, and the owner did not want to give up equity in the company he had worked so hard to build.
The bottom line: About $360,000 stood between the company and a very stable, bright future.
And there was no time to waste. The healthcare system wanted to award the contract within a few weeks, and expected deliveries to start in less than six months.
The Action: Contacting MP Star to Discuss Options for a Cash Flow Management Solution
The owner contacted MP Star to see if invoice factoring was an option for getting through the cash crunch.
MP Star met the owner, reviewed the situation and discussed their cash flow problems. It was determined that:
- The company had close to $750,000 in outstanding receivables
- Its customers in the healthcare industry – hospitals, laboratories, research centers and clinics – were reliable, but usually slow payers
- Factoring the outstanding receivables would give the company enough immediate cash to pay off its existing line of credit, take delivery on the new machine and pay for upgrades on the current equipment
- The company could bid on the contract and also be prepared to submit its invoices to MP Star if the contract were awarded
The Result: A Bid …a Contract …Growth in Business …a Happy Client
The company responded to the bid, knowing that factoring its invoices with MP Star would allow it to buy the equipment necessary to deliver on the deal.
Less than a week later, the owner was notified that his company had been awarded the contract. He contacted MP Star, factored his outstanding invoices, and had cash wired to his bank within 24 hours.
The machine was ordered and installed, the new product started rolling out, and the company was able to meet its promised delivery schedule.
The Cash Flow Management Lesson
Don’t let cash flow problems rob you of opportunities to grow your business. Think outside the box! If your receivables are reliable and can cover your cash requirements, MP Star Financial can probably help. We will review your options and help you find the money you need to grow!
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Call MP Star Financial at (800) 833-3765, extension 150 to discuss how invoice factoring can help fuel growth in business at YOUR company.