Case Study: Enhancing Cash Flow Efficiency in Construction

• Term: 9 months
• Use of Funding: Managing overdue receivables

Background

A thriving construction company with several high-value projects underway found itself hindered by a common industry challenge: an extensive accounts receivable ledger. With significant sums tied up in unpaid invoices, the company faced cash flow constraints that threatened to stall its ongoing and future projects. This situation not only jeopardized the timely completion of current jobs but also limited the company’s ability to pursue new opportunities in a competitive market.

Challenge

The primary challenge was the lag between billing and payment collections, a gap that often extended for months. This delay in receiving funds put considerable strain on the company’s operational finances, affecting its ability to cover day-to-day expenses and make strategic investments. Traditional loan products were not suitable due to their lengthy processing times and inflexible terms, which did not align with the company’s need for quick and adaptable financial solutions.

Solution

MobyCap provided a tailored solution through a flexible merchant cash advance of $600,000. This funding mechanism was specifically chosen for its suitability to the construction industry’s financial rhythm. The merchant cash advance allowed the company to access the needed funds promptly, without the typical constraints of traditional loans. Furthermore, MobyCap included an innovative feature in the financing agreement—a discount for early payoff. This incentive was designed to reduce the overall cost of capital, offering the construction company a way to save money if they managed to settle their receivables ahead of schedule.

Impact

The immediate availability of funds drastically improved the company’s cash flow situation, allowing it to cover operational costs and continue with project timelines uninterrupted. With their financial footing secured, the company could also focus on finalizing projects and moving receivables, which improved their liquidity faster than anticipated. The early payoff discount further incentivized the company to manage its finances more efficiently, resulting in savings on interest payments and a stronger balance sheet.

Conclusion

This case study demonstrates the effectiveness of a merchant cash advance in the construction industry, where cash flow timing can significantly impact business operations. By providing a quick, flexible, and cost-effective funding solution, MobyCap helped the construction company navigate a challenging financial situation, enabling continued growth and efficiency. The success of this financial strategy underscores the value of tailor-made funding solutions in managing industry-specific financial challenges.