Working Capital Solutions

Improve your cash flow and grow your business...

Our Focus:

EMYH Funding works with distributors, manufacturers, wholesalers and merchants

on alternative finance solutions that provide working capital in order for business

to stabilize cash flow, grow, expand and/or get out of tough situations.

Within the pages of this package you will find information some available

programs. We encourage you to get in touch if you have questions, concerns or if

your unique situation requires a creative solution.

Andres Garcia

EMYH Funding | Working Capital Solutions

2445 SW 18th Terrace Ste. 1009

Ft. Lauderdale, FL 33315

Direct: 305-924-6200

Secure Online Fax: 954-320-7066

Overview Do you Accept Credit Cards?

1) Merchant Cash Advance

a. 95% Approval Rate

b. Up to $1,000,000 in 72 Hours

c. No Usage Restrictions

d. Cash Flow Friendly

e. Unsecured

f. No Personal Guarantee Required

Do you have Commercial or Government clients?

1) Accounts Receivable Factoring

a. Cash in as little as 24 hours

b. No Maximum Amount

c. Your credit is not a major concern

d. Personal Guarantee Not Always Required

e. 70% - 100% Advance Rate on Invoices

f. Best rates and terms in the industry guaranteed

g. International OK

2) Purchase Order Financing

a. Finance 100% of your supplier costs

b. Deliver more and bigger orders, NEVER turn down an order

c. No limits, not tied to your monthly or yearly sales

d. Available to established companies and startups

e. PO financing is easy to obtain and can be set up in days

f. International OK

3) Asset Based Lines of Credit

a. $50,000 - $50,000,000+

b. Accounts Receivables, Inventory, Equipment, Real Estate OK

c. Financial solutions tailored to your individual requirements

d. Rebalance Working Capital

e. Avoid Use of Personal Assets

Merchant Cash Advance In an economy in which banks and other lenders are tight on credit, the merchant cash advance has

become increasingly popular among small business owners.

A merchant cash advance should not be confused with a small business loan because there are significant

differences between these two methods of obtaining working capital. Unlike a restaurant loan, for

example, the cash advance has no due date. If you are unable to meet your obligations with a secured

restaurant loan, then you have a chance of losing your property. The merchant cash advance is paid

according to a business’s cash flow.

Example:

Let’s say you have a restaurant that needs $15,000 for remodeling, and the business qualifies for a

$15,000 Merchant Cash Advance to handle remodeling costs.

To get this money, your restaurant would sell the Merchant Cash Advance provider the right to receive a

specific amount of its future credit card sales. For this illustration, let’s say $15,000. So the business sells

$18,750 worth of its future credit card sales to receive the $15,000 it needs right now.

The amount of credit card sales being sold and the amount your restaurant will receive today will be

clearly stated in the term of the agreement governing your Merchant Cash Advance. Also noted in the

agreement is the fixed percentage of daily credit sales that the provider will be sent by your credit card

processor.

After carefully reading all the terms and conditions, you decide this is a good deal for your restaurant. So

you complete the paperwork, send everything to the provider and within days you receive the $15,000.

The provider would work with your processor, setting up the ability to receive a specific percentage of

each batch. Your restaurant is free to spend the money on whatever it needs.

Your restaurant would continue to conduct business as usual. The only difference now is that when you

run a batch on your credit card activity, a fixed percentage of it would be remitted to the Advance

provider. This continues until the full amount your business sold to the provider is delivered.

If your agreement calls for you to forward 15% of your batches until the Advance provider has received the

$18,750 and you run a batch report in which you have processed $1,560 in credit and debit card sales; 15%

or $234 would be automatically remitted to the provider and the balance owed would go down to $18,516.

You did nothing different – it was business as usual. Your credit card processor adjusts your batches to

remit to your provider a fixed percentage until the agreed upon amount is remitted.

Accounts Receivable Factoring Monetizing Accounts Receivables into Cash Business owners know the value working capital provides to their companies. The most efficient use of

working capital offers companies greater flexibility and the opportunity to grow and expand.

Unfortunately for small and medium size business (SMBs), the largest share of working capital is tied up in

accounts receivables. This section of our brochure will address working capital and the opportunity for

private companies to use receivables to monetize their working capital:

Why accounts receivables represent the largest use of working capital for SMBs today.

What accounts receivables cost companies.

Why Wall Street is interested in accounts receivable.

How using an Exchange can “monetize” and standardize accounts receivable financing.

How Trade Credit Binds up Balance Sheets

Working Capital = Current Assets – Current Liabilities Working Capital measures how much in liquid assets a company has available to build its business.

Trade credit is the set of terms a company extends to its customers to allow them to buy goods and

services on account without immediate cash payment, thereby creating accounts receivable for the

company and accounts payable to their customers.

Trade credit is the largest use and source of working capital for SMBs. Total accounts receivable turnover

or annual trade credit totals $17 Trillion in the United States. The average turnover for accounts receivable

is 44 days, meaning that it generally takes over a month and a half for a small or medium sized company to

collect the cash it is owed by its customers.

The length of payment terms is a battle for working capital. Simply, the extension of trade credit is a free

loan. Buyers want to extend this free loan for as long as possible so they can use the capital on their end.

Conversely, sellers want the cash as soon as possible to manage their own business demands. The result is

a working capital tug-of-war, which ultimately restricts growth.

Figure 1 shows giving up 44 days’ worth of return is extremely costly for a company. The opportunity cost

associated with holding long-dated accounts receivable on a balance on a balance sheet can be measured

by lost Return on Equity (ROE). The example given illustrates this loss. Had the company received cash

immediately for the sale of its goods and services, the money could have been reinvested in the business

and earned the company could have been reinvested in the business and earned the company a return on

equity. By not monetizing its sale, but creating a receivable outstanding for 44 days, the opportunity cost

is 2.22%. The faster a company can receive cash for its accounts receivable, the quicker it can reinvest and

grow operations.

Figure 1 If a company can earn 20% on the money it invests in itself, then in 44 days

It can earn a 2.22% return.

$100 x 1.20 44/365 = $100 x 1.02222= $102.22

The appropriate measure for the efficiency with which a company manages its working capital is called the

Cash Conversion Cycle (CCC).

Figure 2 Cash Conversion Cycle=

Days Sales Outstanding + Days Inventory Outstanding – Days Payable Outstanding

DSO= (Account Receivable)/(Total Credit Sales) x 365

DSI= (Inventory)/(COGS) x 365

DPO= (Accounts Payable)/(COGS)x365

The cash conversion cycle is the number of days between when a company pays for materials and when it

receives cash for the sale of those materials. In Figure 3, we assume that a company sells $300,000 of

receivables (note the change in cash and accounts receivables)

Figure 3 Amount of A/R Sold  300,000      

% Discount  2%      

$ Discount  6,000      

   Before     After 

Balance Sheet          

Cash  50,000 add A/R sold ‐ $ Discount  344,000

Account Receivable  400,000 A/R declines by amount sold  100,000

Inventory  400,000    400,000

S‐T Securities  150,000    150,000

Total Current Assets  1,000,000    994,000

           

Current Liabilities (Accounts Payable)  300,000    300,000

LT Liabilities  200,000    200,000

Shareholders Equity  500,000    494,000

Total Liabilities and Shareholder Equity  1,000,000    994,000

Days Sales Outstanding  29    7

Days Inventory Turnover  29    29

Days Accounts Payable Turnover  27    27

After selling the receivables, the company has excess cash that it can invest in operations. Companies

choosing to monetize their accounts receivable see multiple capital efficiencies such as:

An improved Cash Conversion Cycle, in this case by 22 days.

Reduced Days Sales Outstanding (DSO).

Working capital previously tied up for months can be used to expand operations.

Capital that begins earning a return for the business in a matter of days.

Once a receivable is sold, the cash can be reinvested in new inventory, products, employees, or anything

that will earn a positive return for the company. The transaction has now become an accretive decision for

the business.

Ten Reasons To Factor

1. Increase working capital without incurring additional debt or sacrificing equity.

2. Get funding quickly and put your cash back to work in your business.

3. Obtain a much larger advance compared to traditional bank lines of credit.

4. Very little financial documentation is required to get started.

5. Predict your cash flow more accurately. Cash availability no longer relies on the uncertain timing of

customers' payments.

6. Spend less time dealing with Accounts Receivable. We assist you with collection calls and process

your payments on assigned accounts.

7. Improve your credit rating. With the increased cash flow from Factoring, you can make timely

payments to vendors and enhance your credit rating.

8. Increased productivity. With less time spent on cash flow issues, you will be able to spend more

time on growing your business.

9. Reduce the credit risk with your customers. You can utilize our expert credit analysis on potential

clients prior to accepting orders.

10. Reduce your cost of goods. Take advantage of trade discounts from suppliers by making payments

within discount terms.

Purchase Order Financing When a company lands a large sales opportunity only to find that it doesn’t have sufficient borrowing

capability from its lender or open terms from its suppliers, a purchase order finance program may be the

answer the company is looking for.

Managing cash flow against sales growth, costs, and overhead can be a challenge for every business.

Oftentimes, a company’s desire for fast growth clashes with its financial resources, and forces it to find an

alternative, complementary form of capital to meet its short-term requirements while evaluating a long-

term solution.

There are many alternative and complementary funding options available to companies:

Equity could be the best long-term solution for the company, but most sales opportunities have

very tight time constraints. Finding an equity investor or acquirer can take a significant amount of

time, which likely rules this out as a short-term option. In addition, principals of a business are

often uncomfortable bringing in long-term equity partners to solve a short-term problem.

Mezzanine debt is similar to an equity infusion, and may give the mezzanine lender the ability to

convert to an ownership or equity position if the loan is not fully paid back in time. Therefore, the

ability to control the brand and possibly the licenses may be appealing to an outside investor if a

company fails. Because mezzanine debt is most often used for company expansion, a company

must be established in the industry and produce a solid expansion plan for the business. With these

stiff requirements, finding mezzanine debt may be difficult and time consuming.

Tranche B or “second lien” debt lenders can generally adapt their facility to the needs of the

borrower, but this option may not be appropriate for a short-term sales opportunity. The lender

compares the value of the assets and enterprise value against the senior lender’s position. If the

Tranche B lender believes the increase in sales is a sustainable situation, it may be interested.

Tranche B lenders may agree to second priority lien provisions but attempt to position themselves

as pari passu in right of payment with the senior lender. Also, Tranche B loans may be structured

such that the Tranche B lender has leverage to negotiate an equity position in the company.

Transaction finance has various forms, with purchase order finance being the most applicable, for a

sudden, large sales opportunity. Unlike other types of financing that emphasize formulas and

assets, purchase order financing focuses on specific transactions, which support known programs

and sales. The funds provided are used to fund the cost of manufacturing inventory, the related

logistics costs, including duty, freight, warehousing, and the delivery of the goods to the

company’s customers. The transactions supported are carved out of the borrowing base of the

senior lender and are treated on a stand-alone basis.

Purchase order financing will not satisfy every situation where a company needs short-term financing. But,

if a company wants to complete a large sales opportunity that is out of its reach financially, purchase order

financing may be its best – or only – option.

Typical purchase order financing scenarios

Traditional financing is often the answer for moderate levels of sales growth for a stable company.

However, certain sales situations may put a lender in the position of not being able to provide a customer

with the necessary short-term funding. Consider these scenarios:

An asset-based lender has a customer

that distributes industrial tools. The

distributor suddenly lands a large

order from a national construction

company, and requests an immediate

over-advance to purchase the

inventory. The lender is

uncomfortable extending the

company’s credit line; however, in

this situation, a purchase order

finance relationship can fill the gap by

providing up to 100% of the cost of

inventory.

A factor is working with a mid-sized importer of apparel faced with a large order for back-to-school

clothes. Seasonal sales spikes are common in consumer products and can very quickly create large

capital infusion needs for a relatively short funding-to-reimbursement cycle. While a factor

purchases a company’s accounts receivable at a discount for cash, a purchase order finance

company can finance inventory in-transit.

A turnaround consultant is getting a client back on its feet when the client lands a large sales order.

The business would like to take advantage of the sales opportunity, but the turnaround manager is

focused on debt management and negotiating with creditors to help the company eliminate debt

and bring its past due accounts back up-to-date. A purchase order finance company may be the

only option.

Requirements of purchase order financing

If the business would like to work with a purchase order finance company to help meet its short-term

funding needs, its senior lender needs to agree on the purchase order finance provider’s requirements,

including:

1) All assets created by transactions funded belong to the purchase order finance company until the

purchase order finance provider is paid for the assets. The senior lender must be willing to allow the

transaction assets created to be junior to their lien priority until the transactions are completed.

This is typically completed when the senior lender pays the purchase order finance company for the

assets.

2) The transactions available must be sufficient to warrant support by the purchase order finance

provider.

Step 1: by the company’s senior lender

Benefits of working with a company that specializes in purchase order financing

In addition to providing financing, a company specializing in purchase order finance brings the ability to

assist in analyzing, structuring, executing, and minimizing international trade risk. Its expertise in

international trade credit enhancements, such as letters of credit, payments, or acceptances in exchange

for documents (documents against presentation and documents against acceptance) generally creates a

more disciplined and profitable transaction for everyone.

Because an integral part of the financing will be to establish contractual arrangements, as appropriate,

with vendors, shippers, freight and duty companies, and warehouses, the purchase order finance

company’s involvement may aid the client in properly structuring its transactions, facilitate product

delivery, and mitigate potential risks to all involved parties.

The final result: the client may take advantage of growth opportunities leading to substantial increases in

sales and related profits and create additional accounts receivable for banks, asset-based lenders, and

factors to advance against increasing their loans outstanding and related income. Using a purchase order

finance solution may enable a client to take advantage of a sales opportunity that might otherwise be

missed.

Typical purchase order finance provider process.

Asset Based Line of Credit Revolving Credit Facility (Revolver)

A revolver is a loan which can be drawn down and repaid. In a business context, a revolver frequently is

secured by the borrower’s receivables and/or inventory. This kind of asset based loan is designed to

optimize the availability of working capital from the borrower’s current asset base.

Here’s how it works. The borrower grants a security interest in its receivables and/or inventory to the

lender as collateral to secure the loan. This grant of security interest creates the borrowing base for the

loan. As receivables are paid, the cash is turned over to the lender to pay down the loan balance. When the

borrower needs additional working capital, the borrower requests another advance.

The lender manages a revolving credit facility and the related collateral in order to offer the borrower the

largest possible loan amount at any given time. Because the borrower’s customers are generally not

notified of the assignment of the accounts to the lender, the borrower continues to service its receivables.

The borrowing arrangement is usually transparent to the borrower’s customers.

According to the Commercial Finance Association, asset based lending is over a $200 billion market. The

users of asset based lending span a broad range of industries, with manufacturers representing

approximately 31% of the total marketplace, followed by wholesalers (28%), and retailers (17%). By

revenues, the large majority of these borrowers (71%) are under $50 million in size.

Many different kinds of companies use revolvers. They are particularly popular among retailers,

wholesalers, distributors, and manufacturers because these types of companies (a) can benefit from a cost-

effective source of working capital, and (b) have specific types of current assets that can easily be pledged

as security.

The principal advantage is the acceleration of cash flow to the borrower to support its working capital

needs. By using its current assets as collateral, a company is able to generate cash sooner than if it had to

wait for inventory to be sold to become accounts receivable and accounts receivable to be paid in cash.

Cash is available as needed, and any cash not needed on a daily basis is used to pay down the loan balance

and minimize interest expense. A revolving credit facility is actually a very cost-efficient alternative for a

business that needs to liquefy its working capital without having to slow growth or add to its equity

capital.

Most receivables from completed transactions are eligible. Some receivables which fall into specific

categories, however, are not. Typical examples of ineligible receivables would include receivables 90 or

more days past due and any intra-company receivables. Some lenders also have the capability to lend

against certain government receivables and foreign source receivables.

Treatment of inventory varies from company to company and from industry to industry. It would not be

unusual for eligible inventory to include all finished goods and marketable raw materials. It would be

much less common to include work in process, damaged goods, slow moving inventory, or certain

specialized products that can only be sold to a limited number of purchasers.

The amount of your loan depends on the type of credit risk you present to lenders and the type of

collateral you put up. One of the main advantages of asset based funding is the ability to restructure the

loan during times when you're straining to make ends meet.

Revolving Credit Facilities Available

From $50,000 to $50,000,000 +