Calling us first we suggested that he speak with the bank but his first attempt with the bank was the answer we predicted: They had done as much as they could and his loan was new … so he would have to wait.

His return call prompted us to meet with his bank and showing the bank that we could sustain the banks collateral protection, pay down the credit line, and allow this business to fulfill its contracts the bank became all ears. From this conversation we set up what is known as an “Inter Creditor Agreement” with the bank.

In this agreement the bank kept their existing collateral, which backed and ensured the loan, and allowed us to collateralize ONLY the new contract invoices to allow the business to cash flow and fulfill the contracts. As a part of this we set up an agreement where a calculated percentage of what we funded went to paying down the credit line which continuously improved the bank’s position and let the business grow. The result? The business is taking on more contracts … aggressively … and not selling off equity in their company.

If you’d like more information on this contact me at ebrown@finance-manager.com and again we’d love to invite you to provide us your comments via your own blog!