The Mad Bomber Company

The Mad Bomber Company is the world's leading manufacturer of the popular winter hats known as "bomber" hats, which it sells to some of the largest outdoor clothing retailers in the world, including L.L. Bean, Cabela's and Bon-Ton. Brent Reynolds started the company in the early 1980s, when he began importing hats from China, and he has built his small business into a successful global brand. Mad Bomber manufactures its eponymous hats – as well as gloves, mittens, and outerwear – in a factory it partners with in China, and ships products to customers around the world.

After a long period of steady growth, Mad Bomber experienced cash flow challenges beginning in 2008 – like many businesses affected by the financial crisis that began in the fall of that year. The crisis seriously restricted the company's access to affordable working capital. In September 2008, immediately prior to the downturn, Reynolds launched a significant strategic expansion plan, hiring a new management team for its Chinese operations and developing new product lines. It was a capital-intensive strategy that appeared to make perfect sense given his recent success and future opportunities for growth. But the credit crunch changed everything. Mad Bomber's cash position suffered. When Reynolds approached his usual sources of short-term capital – banks and the subordinated debt market – to fund his growth plans, he was turned down. Even with solid financials, years of successful operating history and clear potential for growth, Mad Bomber was shut out of traditional funding sources. The business financing landscape had completely changed.

"It made me really angry because we were a healthy, thriving company," Reynolds said. "With our strong financials and 30 to 40 percent year-over- year growth, banks should have been eager to fund our success."

Reynolds worked hard to optimize cash flow. He negotiated better terms with his large customers and delayed payments to suppliers. He even agreed to the sky-high rates of one lender so he could take advantage of expansion opportunities. A financial advisor recommended that he instead use The Receivables Exchange for a more affordable source of working capital. After researching the company and exploring its website, he spoke with a member of the Exchange's sales team, who helped him understand how Mad Bomber could take control of cash flow by selling high-quality receivables for affordable working capital. Reynolds' experience with traditional short-term financing and factoring made him wary. He figured, because the transaction centered on receivables, that the Exchange was just another form of factoring. His financial advisor assured him that it was not.

"As a midsize company, we don't have the breadth of financing options that larger companies do," Reynolds said. "Banks are not extending credit, even to successful, financially healthy companies like ours. I would not use factoring for my company. The rates are not affordable for us and I don't want to give up control of my customer relationships. But, this is not factoring. The Receivables Exchange is exactly what every business owner dreams of for their business – a flexible, affordable web-based source of capital. It's the easiest funding process I've ever been through."

Reynolds anticipated problems with an existing bank lien on his business, but The Receivables Exchange easily worked out an agreement that allowed him to sell receivables on the Exchange – something that would have been difficult with other receivables financing options. After a straightforward, one-time application process, Mad Bomber was approved to sell on the Exchange in May of 2010. Reynolds posted his first auction soon after.

"We put up an order from L.L. Bean pretty quickly after being approved, and within one or two days we had money in our account," Reynolds said. "When you can decrease your - DSO [days sales outstanding] from 45 days to two, that converts you from a skeptic to a believer pretty quickly. I've never seen anything like it. It has completely changed the way I run my company. "

Since becoming a Seller, Reynolds has traded almost a million dollars of invoices on The Receivables Exchange, and has greatly reduced the time it takes to convert sales to working capital. In addition to gaining access to the cash he needs, Reynolds has been able to lower his cost of capital by 50% by building up a consistent trading history on the Exchange. Because Mad Bomber has a demonstrated track record of successful trades, Buyers compete aggressively to win the company's auctions, driving down the cost of funds. Another benefit of the Exchange is that Reynolds is not bound by personal guarantees or all-asset liens, and he doesn't have to notify his customers that their receivables are for sale. But what Reynolds really appreciates is the ability to use the Exchange whenever the need arises, for financing that's virtually "on demand."

"It's there for me when I need it," he said. "It's flexible, fast, and very easy to use. It has transformed my business from one of being constrained by cash to one of limitless growth."

Reynolds' experience on The Receivables Exchange has been so positive that he has decided to make it a primary source of financing for the long-term future of Mad Bomber. With a flexible, affordable source of working capital at his fingertips, Reynolds can now reinvest in his company, and return to the growth he had to defer at the start of the financial crisis. Mad Bomber is on track to grow by 50% this year with the help of the Exchange, Reynolds says. In fact, the company is growing enough that Reynolds is hiring again in 2011, something he regards as crucial to Mad Bomber's success and to U.S. economic recovery.

"2010 was the most profitable year in our history," he said, "and 2011 is projected to be a great year as well. We are now in the position to add employees, which is what this economy needs, on a large scale, to get growing again. The Receivables Exchange was a critical factor in allowing us to hire and grow as much as we have."