Money Talk: Maximizing Cash, Part 2: Financing

In Part 1 of this article, we considered techniques to maximize cash flow by improving receivables, controlling production, and managing accounts payable. This article will explore financing as a vehicle for quick cash access.

Here are some viable options through the Small Business Association (SBA), including a new program created as part of the Jobs Legislation:

1. SBA (Traditional) 504:

a. A longer loan period than conventional loans, yielding lower payments.

b. Financing available up to 90 percent (Borrower investment = 10 percent of equity; third party lender = 50 percent and first lien on equipment; SBA = 40 percent and second lien)

b. Recommended for new assets and equipment in excess of $1 million.

c. Restrictions: The investment mustbe used to grow the business and yield job creation. Typical loan limit is $4-5 million. Personal guarantees will likely be required from anyone with 20 percent or more ownership in the business.

2. SBA 504 Loan Refinancing:

a. Similar structure to SBA traditional 504.

b. Recommended for refinance of commercial mortgage on real estate purchased more than two years ago. Up to 90 percent of appraised value. Loan proceeds in excess of the refinanced mortgage can be used for any legitimate business expense.

c. Restrictions: Temporary program (Oct. 2011–Sept. 2012); other restrictions apply.

The SBA offers two good credit line options for printers as part of its Cap Lines Umbrella Program.

3. Standard Asset Based Line

a. Provides a revolving credit line to finance cyclical growth and/or recurring short-term needs. Continuous access to your line of credit is based on existing assets. Loan is repaid as your cash cycle dictates.

b. Loan term: five years.

4. Small Asset Based Line

a. Asset based line with a cap of $200,000. Pledged collateral may include accounts receivable, inventory, contracts, purchase orders.

b. Less strict servicing agreements than standard line.

Detailed descriptions of these programs may be found at


Other Possibilities

There are two other financing techniques for attaining cash flow:

• A sale/lease of the commercial building. In this arrangement, the building is sold to a third party then leased back; converting the equity into cash.

• An owner or stockholder who redirects money market or other non-performing personal investments into a loan to the business. With a solid, profitable business, the owner can pay himself seven to 10 percent—whatever the comfort level is. The investment puts cash into the business, and the owner receives a more profitable return on investment than may be currently available with outside investment options. The owner may even be able to secure the loan.

The financing options presented here can help improve business cash flow, but as with any good financial decision, research must be done and all factors considered in selecting the best options for each unique situation.

Stuart Margolis, CPA and partner at MargolisBecker LLC, helps firms operate profitably. Find information at