Challenge: A young fabrication company hit a rough-spot when the oil and gas market began to decline in 2015. They maxed out their line of credit (LOC) with the bank and were struggling to make their payments and had a collateral shortfall. Their primary collateral for the line of credit was their Accounts Receivables (A/R). The borrower needed more working capital, but the bank couldn’t extend them anymore.
Solution: Our team worked to develop a plan that could work for both the fabrication company and their bank. The plan allowed Catalyst to have first position on A/R without any pay down. However, the first funding of every month would be paid directly to the bank to be applied to the termed-out LOC).
Result: The company was able to not only survive but they quickly began to grow in a down cycle in their industry sector. The bank was paid off in full and the company was able to transition away from factoring within a few years. They received a new larger and more structured LOC from the same bank that referred them. The key to this outcome was due to the quick action taken by both the bank and borrower.
If you find your company in a tough spot with the bank, there are many instances where we can help arrange a deal that works for everyone involved.