Tag

revolving credit

2 insights

Twelve monthly columns of working capital tied up at a $24 million holiday goods distributor. Months January to July sit below the $6.8 million covered by the owner's cash and a line sized on the average month. August to December rise above it, peaking at $9.74 million at the end of October, $2.94 million short.

The Best Quarter Starts With the Emptiest Bank Account

A $24 million holiday goods distributor ties up $9.74 million in receivables and inventory at the end of October, against $6.8 million on an average month. A credit line sized on the average runs out in August and is $2.94 million short at the peak.
Financing StrategyBorrower Advisory
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Two horizontal bars comparing the annualized value of a 2/10 net 30 early payment discount at 37.2 percent against the roughly 9 percent all-in cost of a working capital line used to fund it, a spread of 28.2 points.

Your Cheapest Capital Is a Discount You Cannot Afford to Take.

Customers moved from net 30 to net 60, which tied up an extra $1.08 million. The consequence shows up on the other side of the business, where $162,000 of supplier discounts go unclaimed every year because the cash is not there.
Financing StrategyBorrower Advisory
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