Exploring Alternative Financing Options

For the past 18 years LAN Utilities Electric has served the data communications and electrical contracting needs of the New York tri-state area. Built on high quality performance and dependability, Sherri Hotton purchased the reputable business in 2008 and since then has continued to grow and establish LAN as a leading provider of electrical and communications solutions.  From maintenance and service contracts to new construction, LAN Utilities installs and maintains superior data communications and electrical cabling systems.  LAN Utilities Electric services a distinguished group of customers comprised of premier Fortune 500 companies including Deutsche Bank, NYSE, Capital One and TD Bank.

Growing Through Working Capital Demands
Like many small companies, LAN Utilities Electric relied on personal funding and credit cards for cash flow while waiting for their customers to pay. The extended payment terms of their customers meant that they were personally subsidizing their accounts payable and, as the economy worsened – and their customer’s terms were extended even further – they became even more cash-strapped.

“I used mostly personal funding as my single source of working capital to run the business,” remarked Mrs. Hotton, president of LAN Utilities Electric. “While we knew our customers were good for it, 90% of the payments were delayed as our customers tried to shore up their own cash.” With limited cash flow, the company was unable to purchase supplies or bid larger and more profitable contracts.  “It had become a vicious cycle.  If we can’t pay our vendors, we won’t have the supplies for new projects. We needed a better way to manage our working capital but at a reasonable cost.”

Taking the Plunge - Exploring Alternative Financing Options
The costs associated with financing a business with personal funds and credit cards are high. “While it was feasible to conduct our business this way, it was never meant to be a long-term solution. It simply was not a sustainable way to achieve growth,” she added“. Quite simply, we needed a more cost effective way to build the business.”They explored conventional bank financing but were disappointed.  “The entire process was overly complicated and, in the end, not even a viable option for our company,” she remarked.

Sherri next contemplated factoring LAN’s accounts receivable, but in the end decided that while this would certainly solve their short-term cash flow needs, factoring required too many stipulations including collections on their receivables.  “Our customers and reputation are the foundation of our business and placing that in somebody else’s hands is too great a risk,” she mentioned.  “That loss of control could cost us our business.”

Positioned for Growth – TRE, a Universal Solution
LAN Utilities joined The Receivables Exchange in June of 2009 and immediately began seeing the positive impact on its working capital management. By getting the cash they needed when they needed it they suddenly had the flexibility to take on other projects and focus on growing their business. “Maintaining a sufficient level of liquidity was one of my toughest challenges. Now that I can increase my liquidity whenever the need arises, I can focus entirely on managing day-to-day operations and growing the business.”

LAN has used access to capital early in the payment cycle to reduce stress in the collection process. “The Receivables Exchange is a quick and efficient way for me to raise cash without having to sacrifice my customer relationships,” said Sherri. “In addition, the added liquidity allows us to take on contracts with good margins that far exceed the cost of the liquidity, allowing for better growth and profitability.”

After 5 months, LAN has leveraged the receivables of their well-known Fortune 500 customers, established a reliable trading history and significantly lowered their cost of capital while improving their working capital management. “The complete control and flexibility that the Exchange has enabled us to have over our cash flow is simply astounding.  I set all the terms, and when the auction closes, we’re funded the very next day. The speed at which we can improve our liquidity is remarkable,” said Sherri. 

LAN Utilities knows the value of accessing growth capital quickly, easily and on their terms. Join other growth-oriented companies who are using The Receivables Exchange to build their company by turning their receivables into cash. Learn how to become a Seller on the Exchange.  Find out more about LAN Utilities Electric.