CASE STUDY TWO: Commercial Financing

A $7 million temporary and permanent employment agency had a long-term relationship with their bank, based on an asset-based finance arrangement. But shortly after the company experienced its first loss, in spite of clear signs of recovery, their line was suddenly cut off. As it later turned out, it was for reasons unrelated to the state of their account. A change in the bank's industry risk rating had prompted a decision on the part of senior management to stop lending to all of the bank's clients in the temporary employment industry. It could have been a serious setback to the rapidly growing agency, which not only needed working capital, but wanted to be able to fund acquisitions.

Milberg's investigation revealed that this was a sound, if highly leveraged business, and that the expectations for growth were well-founded. We recommended a receivables financing arrangement with a larger line limit, which gave the company sufficient availability to meet all of its requirements.

Result: Years after the original financing, Milberg continues to maintain an excellent relationship with this client, which grew to generate $20 million in sales and show working capital of nearly $1 million.