Working Capital. Every Business Needs It!

Working Capital. Every Business Needs It!

How long would your business last without enough money to cover expenses? Most businesses fail within the first three years due to lack of enough working capital, and even well established operations can experience cash crunches. Competitors are a constant. How financially strong your business is, will determine how well you can compete.

The frustration for many business owners is this – traditional lending sources either require you to be financially solid before they lend you money to grow or are conservative in the amount of credit they extend to the seasoned business operator.

So where do most business owners obtain the financing they need to grow their business? In short, asset based lenders. There is a 2nd tier of lenders below bank financing that finance purchase orders, equipment needs, inventory, real estate and accounts receivable. Essentially any asset listed on a given company’s balance sheet can be eligible for financing. Their focus is either on the quality of the asset they are financing or the financial strength of the customer placing the order (in the case of purchase order and accounts receivable financing). This approach makes financing growth much more obtainable for business owners.

What about financing for the established companies? A challenge remains here as well. Financing available for the established business owners is often inadequate to meet growth needs. Banks are most typically conservative and provide small lines of credit, even to companies with strong net worth and income. Companies need creative solutions when seeking additional capital and this creativity comes from the non-regulated, more entreprenuerial thinking, capital sources in the market. Could your business benefit from knowing a partner like this?

About Huntington Coast Capital.

Huntington Coast Capital secures funding for companies in a broad base of industries. Our clients come to us to find a more flexible lending partner to meet their growth needs. Many are declined by the bank and are in need of a more creative and entrepreneurial funding solution.

We consult on a wide range of funding options for business owners throughout the United States in the following areas:

  • Supply chain financing
  • Equipment loans and lease programs (learn more about our equipment loan platform offered through our subsidiary)
  • Lines of credit for working capital needs
  • Term loans for marketing, hiring staff and general expansion needs
  • Factoring services for accounts receivable financing that also provides for back office credit and collection functions
  • Purchase order financing
  • Asset based loans
  • Business acquisition financing
  • Inventory financing
  • Private commercial real estate bridge loans
  • SBA loans for business and real estate needs

Whether you are a startup or established, in need of $100,000 or $10,000,000 we have the capital partners to meet your needs. Contact us to see how we can assist in taking your business to the next level. To your success!

Asset Based Loans  The Difference Between Interest Rate and Opportunity Cost

Asset Based Loans The Difference Between Interest Rate and Opportunity Cost

Huntington Beach CA 

What is the interest rate? How much does it cost? What fees are involved? These are some popular questions our clients ask when considering borrowing money to grow their business. These questions are typical when looking to see how much something is going to cost over the long run. However, these questions are more applicable to purchases related to a home mortgage, a car loan, applying for a credit card or other more commodity based financial products.

When considering Opportunity Cost the analysis is much different. For example, if I told you the cost of capital for fulfilling multiple $100,000 orders is 20%, you may say “that’s too expensive!” However, when you take a closer look at it, the true funding costs may be only 6% to 7% per order less early payment discounts. The borrower makes substantially more money than the cost of financing if the margins can support the cost.

Here is an example of a typical analysis we take our clients through. It’s a simple way to determine if financing is right for your business.

  • A purchase order is received from a customer and the cost of goods is $100,000 (your cost or wholesale cost)
  • Your gross margin on this sale is 60% (your sales price to the customer is $160,000)
  • Your financing cost is 6.5% of your wholesale cost for 120 day funding or $6,500 ($100,000 multiplied by 6.5%)
  • The gross profit calculated after financing cost is $53,500 on this order ($60,000 profit minus $6,500 in finance cost)

The question becomes, “would you spend $6,500 to earn $53,500?” Most all of us would agree that is a worthwhile opportunity. There are some variables that can effect these numbers both positively and negatively. For example, if your company has high fixed costs, this will chew in to the profits. On the contrary, if you are able to negotiate a discount for early payment to suppliers (i.e. a 2% discount for payment in 10 days, expressed as 2%/10 net 30) it will have a positive effect on profits.

Keep in mind that this is one sale and each additional sale will have a better net earnings ratio. This is because fixed costs typically stay the same and more profit gets kicked to the bottom line as more sales are realized. An example of where this analysis doesn’t make sense is if a company has out of control fixed expenses or super slim margins as seen in the electromics industry. In our experience, this analysis pencils out for most of our clients.

We always encourage our clients to look at how much they stand to make versus solely focusing on cost. The lender also needs to earn a return and if expectations are managed, business owners can grow their companies and earn more as a result.

About Huntington Coast Capital. 

Huntington Coast Capital secures funding for companies in a broad base of industries. Our clients come to us to find a more flexible lending partner to meet their growth needs. Many are declined by the bank and are in need of a more creative and entrepreneurial funding solution.

We consult on a wide range of funding options for business owners throughout the United States in the following areas:

  • Supply chain financing 
  • Equipment loans and lease programs (learn more about our equipment loan platform offered through our subsidiary)
  • Lines of credit for working capital needs
  • Term loans for marketing, hiring staff and general expansion needs
  • Factoring services for accounts receivable financing that also provides for back office credit and collection functions
  • Purchase order financing
  • Asset based loans
  • Business acquisition financing
  • Inventory financing
  • Private commercial real estate bridge loans
  • SBA loans for business and real estate needs

Whether you are a startup or established, in need of $100,000 or $10,000,000 we have the capital partners to meet your needs. Contact us to see how we can assist in taking your business to the next level. To your success!

What Is An Asset Based Loan?

What Is An Asset Based Loan?

Huntington Beach, CA: The term asset based loan is widely used to describe a loan secured against an asset of value as security for the money borrowed. Huntington Coast Capital has been securing asset based loans for our clients in California and across the nation since 2010. Asset based loans consist of loans secured by commercial real estate, inventory, accounts receivable, purchase orders or equipment. Below is a brief summary on how we have assisted our clients in securing asset based loans in California and across the United States in these different categories.

  1. Commercial and investment real estate. Companies that lack sufficient business collateral are often required to pledge outside collateral as an abundance of caution in this type of asset based loan. Often referred to as bridge loans, these loans usually have terms of 6 months to 3 years and are offered through private money capital providers. These asset based loans are offered in California and throughout the country.
  2. Inventory loans. For companies in the manufacturing, distribution, wholesale and retail spaces, inventory represents cash tied up in goods for sale. Inventory can be used as security in an asset based loan. Depending on the type of inventory however, a loan may not be available. For example, if a company is selling fresh fish, meat or poultry, finding an asset based loan will likely not be possible due to the quick turn of this type of product and the potential for spoilage. Other forms of inventory such as t-shirts, tires, dried goods and other products with long shelf lives have a much better chance of being accepted as collateral for an asset based loan.
  3. Accounts receivable and purchase orders. These two assets represent an amount owed and an order for shipment. Both of these asset types qualify for an asset based loan. In fact, these two asset classes are the most popular asset based loan being requested from our clients in California. Companies in search of improved working capital utilize their accounts receivable as collateral for an asset based loan and their purchase orders as collateral when looking to obtain funding to cover their cost of goods to suppliers.
  4. Equipment loans. Asset based loans used to purchase or refinance equipment are for a specific purpose. Retail sector companies such as restaurants are big users of equipment loans as well as companies in the manufacturing sector. Often times in business acquisitions, equipment loans provide a portion of the funds required for the purchase if the equipment is currently owed free and clear and has a usable life of over 10 years.

Asset based loans are vital to the economy and provide funds to companies when more traditional finance programs can not meet the need. If you are a California company in search of an asset based loan or are located anywhere in the continental United States and looking for financing to take advantage of growth opportunities, consider an asset based loan.

Need assistance navigating the capital markets? That is our specialty and we are eager to help. For advise and counsel on asset based loans or any other form of business financing, give us a call 714-719-8966.

To your success!

Patrick Zazueta
Huntington Coast Capital, Inc.

HCC Funds $1,300,000 In Business Loans In The Month Of December

HCC Funds $1,300,000 In Business Loans In The Month Of December

Huntington Beach, CA.  During the month of December Huntington Coast Capital secured a $650,000 equipment loan and two SBA loans for $500,000 and $150,000 for a total of $1,300,000 in business loans! The scenarios are outlined below:

  1. $650,000 equipment loan for a southern California contractor – The company was paying a high rate of interest on the equipment they used in their day to day operations – The high cost of financing was impacting their cash flow. They engaged Huntington Coast Capital for their equipment loan needs and we were able to reduce their financing costs by almost half, saving them thousands in monthly finance expense.
  2. $500,000 SBA loan for a growing company in the stencil business – The company produces custom stencils for any design and application. The company had an existing SBA loan and were looking to borrow an additional $350,000 to purchase additional equipment to meet growth demands. Huntington Coast Capital secured a $500,000 SBA loan to cover the equipment costs and refinance the existing SBA loan.
  3. $150,000 SBA Express Loan for a custom glass manufacturer – An established custom glass manufacturer was looking for additional funds for advertising and marketing to break in to new markets and broaden their customer base. They have a profitable business serving general contractors and are looking to expand in to direct commercial work.

Whether your business loan needs are for equipment purchases, inventory or general working capital demands, we can assist. We serve companies of all sizes from startup to established.

Equipment financing, inventory financing, and working capital loans are easy to find right? Not if you’re in one of these two scenarios…

Equipment financing, inventory financing, and working capital loans are easy to find right? Not if you’re in one of these two scenarios…

Huntington Beach, CA: Business owners looking to obtain a business loan for equipment financing, inventory financing or working capital have many options to choose from. Capital is plentiful for companies on the rise and in need of financing to meet their growth potential. In fact, most of our clients come to us with equipment financing, purchase order financing, inventory financing, and working capital loan needs. Huntington Coast Capital has a extremely high success ratio in placing these loan requests.

However, there are a couple of situations where this may not be so easy. On a rare occasion we will get a funding request for a company in the medicinal marijuana industry. While the selling of marijuana is legal in some states, there is still a stigma attached to it, even if it is legitimately prescribed by a doctor. As you can imagine, obtaining funding for the growers and distributors in this industry, even if completely legitimate, is very difficult to secure. Some lenders simply do not lend in this industry and lump it together with other unsavory industries like gambling and adult content distribution. Is this fair? I have no idea. This article isn’t about providing an opinion on what the lender’s moral compass should be when analyzing loan requests in this industry. I can say, however, that finding a lender to fund your expansion in this business is very difficult. In fact, even with our extensive contacts in the industry, we only know of one. That’s right one. However, we were happy to have this contact when we received a call from a company in Colorado inquiring about an equipment loan along with funding for tenant improvements for his budding (no pun intended) business. The fact is that his cash flow and profit margins are extremely strong and his business could grow substantially with the right capital partner. Looks like we found them a solution after months of searching on their own in vain. A satisfying moment for us indeed. Now his Cannabis business is set to catapult to the next level!

The second difficult spot to be in is when you are looking for accounts receivable financing for consumer accounts receivable. The market is flooded with options for financing accounts receivable when you are selling business to business, but business to consumer is a ghost town. Most all lenders have the perspective that financing against these debt pools is risky and the credit process for business credit and personal credit is much more subjective and difficult to manage. I have to say, that I agree. To manage risk in this area requires having a specialty and sole dedication to the industry. Like other types of lending, you need to manage losses through diversifying the risk over several separate exposures and minimize credit to any one debt holder. However, this said, it is possible, just not popular among the lending community. As before, we have only one lender in this industry! We don’t come across these requests too often, but when we do, it is satisfying to say, “we may have a solution.”

Do you have a difficult loan request? Has everyone told you “no” because you fit one of the scenarios above? If so, we would like to speak with you!

Be on the lookout for our next blog article that features auto mechanics and why that experience also requires a knowledge of the options! I think we can all agree that we are paying too much for our cars to be serviced in most cases and it pays to know who else can do it for less!

Contact us 714-719-8966

HCC Secures $570,000 Loan For An Electronics Distributor

HCC Secures $570,000 Loan For An Electronics Distributor

In a first of two capital placements, Huntington Coast Capital secured a $570,000 SBA 7A loan for a electronics distributor in Chicago, IL.

The company was in dire need of additional capital to meet it’s growing demand. They needed capital to purchase the inventory they then sold on their online platform. Because the company sold at point of sale through the website, they were not a fit for traditional accounts receivable financing.

The company specializes in refurbished tablet computers – mainly iPad and Samsung units. In this business, it is necessary to have the inventory on hand to be able to fulfill customer orders in a timely manner. The newly acquired line of credit will allow them to do just that.

As a second step, HCC is now working with them on a supply chain funding facility for an additional $500,000 to work in conjunction with the existing financing. With a total purchasing power of $1,000,000, the company would be able to grow exponentially.

If your business could benefit from additional capital, we would like to speak with you.

To your success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.
714-719-8966

HCC Obtains $1,500,000 Credit Line For Wireless Company

HCC Obtains $1,500,000 Credit Line For Wireless Company

Huntington Coast Capital negotiated and procured a $1,500,000 credit line for a wireless service provider in Irvine, CA. The company was outgrowing their bank’s ability to fund their projects. The nature of their product required contracts for service over an extended period of time, and often were in the multi-million dollar range. The contracts required capital prior to delivery to cover cost of goods and other fixed expenses. This made a traditional accounts receivable line of credit challenging because most lenders lend on accounts receivable after services have been delivered.

They spoke to a number of community banks and finance companies and none seemed to deliver the amount of capital (at the right price) for their needs. Enter Huntington Coast Capital. After our initial consultation, we introduced a couple of avenues and potential lending sources for them to choose from. We introduced a factoring company and a couple of creative asset based lenders for them to consider. After the proposals were received, HCC highlighted the differences in the funding options and ran the cost through our pricing model matrix to offer a side by side comparison.

The company made their choice and are now able to meet the demand of their pending contracts and grow the company significantly.

Contact us to discover how we can deliver the capital you need to take your business to the next level!

Huntington Coast Capital – Fueling the Economy, One Business At A Time!

HCC Secures $2,300,000 for a Glass Fabricator in California

HCC Secures $2,300,000 for a Glass Fabricator in California

Huntington Coast Capital secured a $2,300,000 line of credit for working capital and equipment needs for a rapidly growing glass fabricator in California.

The company, established in 2009, offers full service glass fabrication out of their 80,000 square foot, state of the art facility. Their product offering includes architectural and creative glass fabrication services for office, industrial, retail and residential uses.

They were referred to us by a local bank that required a lock box arrangement which the borrower was not able to oblige. After our initial consultation, we directed them to a select group of three lenders to discuss their financing needs and preferences. In the end, they selected a lender that was able to provide the equipment loan (with lower fees than the SBA product) and working capital needs without the use of a lock box. The borrower now deposits his collected checks from customers into his bank account that the lender sweeps to repay the loan balance.

The entire process from introductions to funding took under 35 days! Now the company can meet demand and grow with their lender. Another example of how Huntington Coast Capital takes the headache out of finding the best lender for your business.

If you business could use additional capital to meet you company goals, give a call.

To your success!

Patrick Zazueta | Founder
Huntington Coast Capital, Inc.
714-719-8966