Introduction:
The eRevenue system, used by , is completely flexible and thus able to deal with a variety of working capital lending situations. This case study will highlight a hybrid product that operates exclusively on the eRevenue platform used by — the Blending of a Line of Credit with Accounts Receivable Purchasing. This hybrid application recently enabled a lender partnering with to successfully deal with a working capital need of a large commercial customer. With permission, here is their story:

(For privacy purposes, the name of the lender and their client has been changed.)


Real-life Application:
Alpha Fixtures, Inc. had a $75,000 line of credit with 1st Community Bank secured by accounts receivable, inventory, and a personal guarantee from the owner. For the most part, Alpha Fixtures was able to handle their working capital needs with the $75,000 line of credit in conjunction with their receivables collections. However, each year Alpha’s business spiked in late Fall and in early Spring. During these seasons, the $75,000 credit facility was insufficient to cover Alpha’s working capital needs. Recognizing their seasonal demands for working capital, Alpha requested a larger credit line with 1st Community Bank.


Although Alpha was a good client that 1st Community Bank wanted to help, Alpha Fixtures did not have an on-going borrowing base to support a line of credit increase up to the $200,000 level they needed during those seasonal jumps.

Recognizing they could not increase the working capital credit line, 1st Community Bank contacted , their Asset-Based Lending partner, and together they did an in-depth analysis of Alpha’s main customers. It was discovered that Alpha had several Fortune 500 companies with which they did business. Three of Alpha’s customers had very high credit ratings as well as substantial invoice balances during Alpha’s spiked seasons. Therefore, 1st Community Bank partnered with Inova Capital Funding to utilize the invoice purchasing capability of the eRevenue system. A hybrid product was then structured for Alpha giving them the working capital they needed during their seasonal spikes, while simultaneously keeping 1st Community Bank in total compliance.


Deal Structure:
In looking at the balance of the receivable base as well as the inventory securing the line of credit, it was determined that the borrowing base of Alpha was sufficient without receivables from customers X, Y and Z. Additionally, the line of credit was monitored daily by 's eRevenue system to assure the line balance was covered at all times. This freed the receivables of customers X, Y, & Z, enabling them to be purchased by under an accounts receivable purchase line agreement.

Therefore, 1st Community Bank left Alpha’s $75,000 working capital line of credit in place secured with accounts receivable (excluding receivables from customers X, Y and Z), inventory, and a personal guarantee of the owner.

In addition, set up a $125,000 accounts receivable purchase line for Alpha Fixtures secured by receivables from Customers X, Y and Z. actually purchased the receivables of Alpha’s customers X, Y and Z according to the terms of the receivables purchase agreement, earning the contract stipulated discount fees and interest.



Win-Win:
This deal structure enabled 1st Community Bank, with the help of , to supply Alpha Fixtures with the working capital they needed to fulfill the orders they had during their peak seasons. When the peak season ended and the receivables were collected, the Accounts Receivable Purchase Line remained dormant until the next peak season.

Alpha Fixtures was thrilled with the solution provided by 1st Community Bank, thus cementing a long-term client relationship. Additionally, 1st Community Bank increased their yield by participating in a 10% fee split with on the additional Accounts Receivable Purchase Line.