Mason-Grey Corporation

Building on Adversity

When his predecessor company was forced to file for bankruptcy in 2001, executive Joe Reini saw more opportunity than adversity.  His customers still had a critical need for the services that were being provided, so it was only natural that Joe would found a new company to take advantage of the unmet demand.  By providing highly specialized engineering services that improve industrial process plant efficiencies, Georgia-based Mason-Grey is still taking advantage of the rising demand in their niche market more than seven years later.  Mason-Grey’s services concentrate on process industries such as pharmaceutical, metals processing, energy, plastics and refining.  Over the years, Mason-Grey has developed a deep roster of blue ribbon clients that depend on the company’s services’ to ensure that their plants run smoothly.

A History of Consistent Growth

Since its founding, Mason-Grey has been able to expand its scope consistently year-over-year.  In the early years, the company easily funded its growth through internal cash flow.  Terms of credit between Mason-Grey and its customers remained simple, and the company easily managed its costs.  “Achieving consistent growth was never a major issue for us,” remarks Joe, “it was making sure we managed the growth correctly that was a key focus.”  The financial profiles of engineering providers generally exhibit a high proportion of total costs that come from salaries, which are recurrent.  Matching invoice remittance from new growth initiatives with salary obligations had to be closely monitored, and often lead Mason-Grey to measure their growth initiatives to ensure they did not over-stretch.  “I could have grown our book of business at a much faster rate if I wanted to, but that would have required some form of financing, which would entail adding more financial risk to my business.  I was never comfortable with that approach.”

Exploring Financing Options

Still, as much as he had hoped to avoid taking on debt, in late 2008, Joe decided that it was time to explore bank financing to continue his pace of growth.  He met with several lenders and entered into negotiations with a bank regarding a line of credit that he could potentially tap as needed to finance some of their growth opportunities.  Unfortunately, as is commonly the case with service companies that do not have tangible collateral to use as security for the loan, the bank was only willing to extend them a line for a small proportion of their outstanding accounts receivable.  The small size, combined with the disproportionately restrictive terms and conditions that he would have to agree to in return made the LOC unappealing to Mason-Grey.  Unfortunately, since restrictive terms for smaller companies with a short track record are the norm in small business banking, Joe found himself out of options to finance his growth.

The Receivables Exchange: A Good Fit for Small Businesses

In the spring of 2009, Mason-Grey heard about The Receivables Exchange, where he could post his outstanding invoices – one or multiple invoices – on his terms and use the influx of working capital to take advantage of the many growth opportunities he was passing by previously. After his first auction, he was hooked. Not only were the receivables sold on his terms – and the funds wired into the company’s bank account 24 hours later - after only a few auctions, he was able to reduce the cost of capital by building a consistent transaction history enabled on the Exchange and thereby improving his appeal to Buyers. As the Exchange’s Buyers (global network of accredited institutional investors) saw more successful auctions coming across from Mason-Grey on a regular basis, their bids became even more competitive as they each tried to secure the winning bid.

The increase in liquidity and access to affordable, short-term working capital has provided Mason-Grey the financial flexibility needed to expand and manage its growth properly. “Now we can accelerate our growth when we want – on our terms. If I want to add staff, I can add them, make them billable and immediately turn those new hires into cash. We have some very significant growth opportunities ahead of us, and without The Receivables Exchange we would not be able to capitalize on them.” Because Mason-Grey’s auction history is transparent to TRE Buyers on subsequent auctions, the more Mason-Grey transacts, the more its cost of capital is reduced. Buyers on the Exchange recognize that successfully completed auctions are a good sign and serve to boost the confidence in placing future bids. And, as Mason-Grey has seen firsthand, they bid accordingly.

A New View of Receivables Financing

Because the Exchange does not require Sellers to monetize all of their invoices, but instead allows them to choose when and at what price they wish to sell individual invoices, Mason-Grey maintains complete control over its cash flow. Since becoming a Seller on the Exchange, Joe holds a different perspective on the theory of receivables financing to enhance growth. “I don’t view this as financing, I view this as an incremental cost I incur to produce the additional revenue. And, because the costs are affordable, and allow me to keep control of my working capital, for the invoices we sell on the Exchange, I simply build the discount at which I sell my receivables into my Cost of Goods Sold (COGS).” The slight increase in internal cost to produce revenue is vastly outweighed by the heightened liquidity that Mason-Grey is able to achieve by cutting their - Days Sales Outstanding (DSOs) down dramatically.

Many companies just like Mason-Grey are coming to similar conclusions as they find early success on The Receivables Exchange. Small and mid-sized businesses are no longer judged by their short track record or less-than-perfect credit rating. Rather, because Buyers judge the credit quality of the Seller’s account debtors, they are able to leverage the strength of their best customers to increase their short-term liquidity at competitive rates—when and how they see fit. We all know that sources of alternative funding and strategic cash flow management tactics are important but, in a downturn, they can mean the difference between life and death. We have been fortunate to help hundreds of companies find not only the means for survival in tough times, but also a vision for growth despite the economy’s woes.