- How it works
Banks offer financing backed by purchase orders, accounts receivable, and inventory. Relationships usually last two or three years, during which the bank also manages the client's trade activities.
- Who qualifies
Companies with strong managers, growth potential, $5 million to $50 million in sales, and margins of 20 to 30 percent. Most have weak balance sheets.
- What it costs
Financing fees typically amount to 30 percent of the profits generated during the course of the relationship.
- What happens next
By the end of the deal, many companies qualify for more traditional forms of financing.
Published on: Mar 1, 2006