Introduction:
Working with our partner banks, specializes in solving cash flow problems and challenges facing commercial clients. In our regulatory age, where knowing your bank client is one of the paramount rules, having solid working capital solutions for small to medium-sized business customers is essential. The flexibility of the eRev system used by to process working capital solutions allows banks to structure programs specific to the needs of these small to medium-sized businesses. Essentially, the loan officer is able to get on the same side of the table as the bank client to work out an optimal cash flow solution.

One of the greatest tools offers to their bank partners is the ability to set up their client’s working capital program using a graduated payment discount. This allows the small business to export invoices from their accounting package directly to 's eRev system. The bank's client can then advance precisely when they need the cash, thus lowering their per-invoice cost for working capital. Below is an example of optimizing this technique to fit the needs of the bank client. Using this dynamic cash flow solution, the client can enhance their overall bottom line. The following is a real story from one of 's bank partners.

(For privacy purposes, the name of the bank and their client have been changed.)


Real-life Application:
Rail Pro was a manufacturer of railings for buildings and decks. The officer at Bank One took the time to understand Rail Pro’s business. He sat down with the owner and looked at some different ways to optimize Rail Pro’s cash flow needs by using 's Transaction-Based Financing (TBF) program which Bank One had put Rail Pro on several months earlier. Bank One's officer quickly noticed that one supplier was providing 75% of Rail Pro's raw materials and Rail Pro had 60 day terms with that supplier. The customers of Rail Pro took approximately 50 to 65 days to pay. Therefore, the large ticket invoices were due to the supplier before payment was actually received from Rail Pro’s customers.

The cash flow gap had been covered very nicely with 's TBF program. However, the Bank One officer took it a step further and asked the owner of Rail Pro if he had ever discussed a supplier discount with this supplier for paying invoices before 60 days. The owner had not, and upon the bank officer’s suggestion, the owner called his supplier and discovered he could get a phenomenal 8% discount for paying these large ticket invoices in 30 days instead of 60 days. He sat down with Bank One's officer to see how taking advantage of this supplier discount would affect his overall cash flow situation.

The following graphical illustration shows how this program was optimized:


Win-Win:
The original solution allowed Rail Pro to cover an average 15 day cash flow gap with their TBF program. The typical cost of funds for being out 15 days on the graduated payment discount program was 1.25%, or roughly $1,250 per one hundred thousand. The supplier invoice was $80,000. By taking advantage of the 8% discount, Rail Pro advanced on their receivables at the 30 day mark instead of the 60 day mark. This increased the cash flow gap to 45 days. The supplier payment was $73,600 instead of $80,000 giving Rail Pro a $6,400 discount. The funds cost for being out 45 days instead of 15 days increased to 2.75% or $2,750 per one hundred thousand. Instead of an actual cost to Rail Pro, this scenario gave a net savings to Rail Pro of $3,650.

After 12 months of being on this TBF cash flow solution program (processed by using the eRev system), Rail Pro was able to add over $65,000 to their bottom line. This was money they would not have had without using this optimized cash flow solution. Needless to say, Rail Pro was ecstatic.

Bank One not only provided a working capital solution for Rail Pro but was instrumental in helping them add over $65,000 to their bottom line. Rail Pro stayed on this TBF program for 18 months. After that time, Rail Pro’s financial condition had changed considerably, and Bank One moved them to a relationship using 's ABL program which was processed by on the same eRev platform.


Summary:
The flexibility of 's working capital programs to advance (or take a draw) only when the business needs the money, and only for the amount needed, allows businesses to take advantage of supplier discounts. This same flexibility provides other business opportunities such as quantity purchases, which also enables the business to improve their bottom line.