Get Working Capital at Competitive Rates - Accounts Receivable Financing at The Receivables Exchange

With more than 20 years in the cigar industry, Eddie Ortega and Erik Espinosa founded United Tobacco Inc., also known as EO Brands, in 2003. Founded as a tobacco distributor, they have built the business into one of the most reputable and rapidly growing manufacturers and sellers of unique hand-made cigars. They are known mostly for their 601, Cubao and Murcielago cigars, hand-rolled by the famous Jose Pepin Garcia in Nicaragua.  United Tobacco currently sells to some of the largest full service premium distributors of imported tobacco products including Miami Cigars, Cigars International, Thompson Cigars and Famous Smoke.

Growing Through Working Capital Demands
Like so many small and midsize companies, the early stages were mostly self-funded with support from a small bank line of credit.  As they started to blaze their trail in the industry, they also started to experience the difficulties of effectively managing their working capital to grow with them. “Most businesses start on a shoe string, but once you establish a growth pattern, the greatest challenge is figuring out how to find the flexibility you need in your working capital,” remarks Mr. Ortega. “Like many companies our size, in addition to needing to use substantial capital to develop our product, our business still requires a significant investment in marketing and brand development to drive demand to increase revenue. In particular, our industry requires considerable travel to tradeshows to increase penetration. Without sufficient cash flow, it’s simply impossible to meet demand and grow our business.”

“Another challenge was that, while our customer base was growing – we had more than 600 accounts – they were mostly smaller accounts, making our collections process very time intensive,” added Mr. Ortega. “One of the best decisions we made was to throw our focus on our larger distributors, building and solidifying those relationships, thereby reducing our AR requirements. However, we did this with the full understanding that it would still require vigilance on our part to collect from these fewer, larger players on time.”

Raising Capital When you Don’t Need It
“Maintaining a stable business for the long-term means having sufficient liquidity - even when you don’t have an immediate need,” said Eddie. The business had an established relationship at their bank, so it never occurred to them that it would be difficult to increase their LOC. “We hit a growth pattern that required us to enhance our cash flow position, but the bank was unwilling to increase our line at a reasonable rate despite our track record of profitability, our clear potential for growth and ability to repay the debt,” he continued. Without a reasonable means to access a larger amount of affordable capital it could become difficult to sustain their current growth pattern or take advantage of new opportunities.

Factoring was worth exploring, but Eddie was apprehensive about selling all of their receivables and having someone other than EO Brands collect and maintain that relationship with their customer.  “For us, it is vital to our business and our small community in the cigar industry that we maintain the relationships with our customers – we simply were not willing to hand over contact with our account debtors that we had worked so long to build to increase short-term cash flow.”

The Receivables Exchange: Flexibility When You Need It
“When I heard about the Exchange, I was immediately intrigued by the possibility of increasing liquidity in a couple of days rather than months – and all without giving up the relationship. And, my second auction sold in minutes and the funds were wired to us the very next day. It is remarkable to be able to get access to cash that fast.”

For EO Brands, The Receivables Exchange continues to help them build a stronger company by providing them access to short-term liquidity when they need it and on their own terms, providing them the freedom to pay their vendors quickly, effectively market their product and reach their next stage of growth. And, as they continue to create auctions and build up their transaction history, their cost of capital decreases as Buyers’ confidence is boosted and bids become even more competitive.

“One of our annual goals is to produce and launch a new premium blend as we did most recently with Cubao and Murcielago. The Exchange provides us with that added flexibility to raise the capital necessary to market and promote these new products when and how we want,” he commented.

The fact is, undercapitalized businesses are vulnerable in any economy and maintaining sufficient levels of liquidity is what keeps them healthy and less susceptible to a challenging and volatile economy.  Everyday more companies are turning to The Receivables Exchange an online capital marketplace for businesses to turn their invoices into cash, giving them alternative ways to finance growth and increase liquidity. Learn how to become a Seller on the Exchange.  Find out more about EOBrands.