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Boomerang Clients

What is a “Boomerang Client” for a finance company, and is it a good thing?

We often hear about “boomerang kids” – children who graduate from college and move back home with their parents for a variety of reasons, instead of finding their own apartment. A kid boomeranging home on an open-ended basis is usually viewed as negative for all involved.

In contrast, Boomerang Clients are often a good thing. Boomerang Clients in our industry, simply put, are clients that graduated to a bank, but now, for a variety of reasons, want to come “home” to us, their prior working capital provider.

Recently, we had a beloved former client return to us from a two-year stint with a bank that was providing them less-expensive, but very rigid financing. Why were they coming home? Was it a good thing for them, for us?

With the benefit of our working capital financing and operational support, this client grew their business, sales, and systems over a two-year period. With a more seasoned track record, the client was then able to draw the attention of a local bank that was willing to give them a $500,000 revolving line of credit at an insanely low-interest rate. We were very supportive on exit and wished them the best of luck. After all, it is a successful relationship for us when a client grows and becomes stronger to the point that a bank will finance them.

Fast forward 18 months. We get a call from the former client. He now hates his bank and wants to come back to us. Last year his company had slower performance than the prior year, but he had a large pipeline of projects and needed working capital to finance it. Some anonymous credit risk officer in the bank saw the reduced sales and bottom line for 2016 and cut our client’s credit line in half — just like that, with no opportunity to explain why or how he was positioned for a better 2017.

We reviewed his plan for 2017 with him, his pipeline, his customers. Unlike us, banks do not get into the weeds of understanding the various aspects of our client’s operating expenses, every underlying customer and their payment behavior. With that level of intimate knowledge and understanding, we were able to see the promise, and how to provide a fair level of financing to allow 2017 to be a recovery year.

Were we more expensive than the bank? Yes. But our client’s calculus was that we are a genuine partner in his operations, not an adversary (as banks often become the second there is a hiccup or a change in policy or staff at the bank), and he would make a lot more money – and have lower blood pressure – if he came back to work with us instead.

We understand that sometimes things don’t always go as planned, whether your kids move back home or your new financing arrangement wasn’t what you thought it was. Our flexibility and dedication to our clients differentiates us from our competition – and makes it easy for clients to come home.

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