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Our purpose and challenge is to help smaller businesses responsibly grow by helping them manage their working capital needs and providing accounting and general business advice. Every company and industry is different, but one of our clients, a signage designer and manufacturer for major construction projects (“Signage Company”), encompasses a number of the qualities and attributes that drive us to come into work every morning.

Signage Company is owned by a husband and wife, immigrants to the United States. They have seven employees and have built their company from the ground up over the past five years, which produces specialized interior and exterior signs for everything from mass transit systems to universities and corporate headquarters. As a certified minority-owned entity, Signage Company has had the opportunity to bid and have been awarded some of New York’s most prestigious construction projects. Over the years, they have reinvested their own cash and taken credit card debt to purchase specialized equipment, piece by piece. Signage Company has developed a sterling reputation with contractors and architects for quality, timeliness, and reliability, and at any one time have at least several major projects on the shop floor, with more in contract. This company is everything to its owners, and the husband, the proprietor, has worked hard at getting better at running his business, taking business classes at night in a prestigious program designed to teach entrepreneurs marketing, finance and management skills for building a growing business.

Sounds great, right? Well, Signage Company faced several challenges when it was introduced to us by a smaller factor a couple of years ago. Basically, its customers, large multi-national construction companies and general contractors, all sterling credits in their own right, treat Signage Construction Company as their bank, stretching out payment of Signage Company’s receivables about as far as they can be stretched, sometimes upwards of 150-180 days. There is a lot of “bill and hold” to these long-lived receivables, where Signage Construction Company is ordered to produce signage for a major project, and then when it bills its client, the client says that it won’t be ready to receive the signage for another three months, and to hold the inventory, obviously aggravating the receivables aging problem. Signage Company is forced to go out of pocket, paying for materials and labor for major projects, and the situation is just aggravated further by carrying that cost for months at a time while waiting to collect and also trying to build to meet a growing order book.

Our solution has been a traditional factoring facility for billed receivables, coupled with a work in progress (“WIP”) revolving line of credit, where advances are made against raw materials and their completion rate, based on an escalating scale as completion is approached (remember, these signs are being produced per contract with very good credits – who simply do not pay for a long time). The discipline of this approach requires very close communication and cooperation between our firm and Signage Company, with verbal interaction just about every day not only on detail level matters, but also sharing our experiences from other clients and industries and perhaps bringing an idea or two to the proprietor that he hasn’t thought of, such as coding the invoices as items are partially completed, completed and shipped out the door so it is easier for both factor and Signage Company to track. Signage Company is able to monitor all lockbox and wire payments, and other reports such as accounts receivable aging, advance and disbursement status, etc. through our web portal, and know exactly where they stand. The transparency of both our funding process and receivables billing and collection has benefitted Signage Company, as its proprietor, who probably understands and monitors his business and its cash flows much better today than several years ago, is now better educated to price, take on and fund sustainable growth opportunities. This situation can be contrasted to that of a typical, quickly growing entrepreneur, signing contracts left and right, with no plan as to how to pay for it later — often resulting in a train wreck or very, very expensive capital solutions.

Bottom line, Signage Company has more than doubling its business in the past two years with less capital (and emotional) stress than would otherwise be the case when experiencing such aggressive growth in an industry with such slow performing lousy accounts receivables metrics.

There is nothing harder than building and growing a small business. We love to help our clients do it. It’s what gets us up in the morning.