Learning Center – Accounts Receivable Loan

Case Study Summary

We secured an accounts receivable loan to create a revolving line of credit (RLOC) to enable the client to access profits in real-time, rather than within the 62-day average waiting period.

Client Profile

The client, a larger educational center, was incorporated under the laws of Texas in 1998. It offers educational services to home schooled students and to traditionally schooled students.

The sole owner of the center was a Ph.D. in mathematics and has taught at the college level for over 20 years and at a secondary and elementary level for more than 10 years. The operational headquarters are located in Texas.

Loan Approval Factors

  • Capitalization: The company anticipated the need for financing as follows:
  • Use of Funds:  
    • New construction of building      $3,500,000
    • Pay off a bank property loan of   $500,000
  • Total Use of Funds                               $4,000,000
  • Source of Funds: Loan                        $4,000,000
  • Loan Request: Construct new building for school and pay off Shady Bank for the Joplin Smith property. Total dollar requested $4,000,000 twenty-five (25) years five-year fixed rate.
  • Collateral: First mortgage on land and improvements. Prior to closing, value of existing collateral was supported via an appraisal, receipts, and appropriate schedules.
  • Nature of Operations: Company has been in business since 1999. The Ph.D. owner has invested $165,000 into this project and $275,000 total in the business. He had 125 contracts for the homeschool program and received $7,000 for his salary per month under the funds available for the project.

The Problem

In this case, there were no real problems due to a wealth of available market data, solid management and credit history and ample collateral.

Our Solution

Based on area statistical data, a market could clearly be established to exist for the company’s continuation in its current location.

The End Result

The accounts receivable loan we produced yielded the client a $600,000 RLOC to support their accounts receivable. This solution added value to the client via the RLOC though immediate cash from their slow turning accounts receivable, which were turning every 62 days. In short, with the RLOC secured for the client, they were now able to receive their cash profits more quickly, without waiting for the accounts to be paid.

If your situation is similar, contact us today to discover your best options.

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