‘Accepting’ the AeroPay Express Virtual Card: Case Study

January 30, 2017 by Stephen K. Troy in with 0 Comments

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A large food processor contacted AeroFund Financial interested in signing up for our latest service the AeroPay Express Virtual Credit Card. They wanted to pay vendors, get extended terms and have greater buying power. In analyzing the company for a $200,000 credit line, the AeroPay staff found that things were more dire than the company lead them to believe. There were several judgements, a few tax liens, they were past due on payroll taxes and they were seriously behind with vendors. To top it off, they had an overdue credit line with a local bank and in violation of bank covenants. To issue an AeroPay Express credit line the credit of the applicant must be excellent. This is an unsecured credit line so cash flow and history of paying company bills is of the upmost importance. 

Even though the food processing company didn't qualify for the AeroPay Express Virtual Credit Card it didn't mean we couldn't help. The company did have some valuable assets, not to mention $400,000 in current accounts receivable.  Yes, all were encumbered by various liens. The obvious solution would have been to offer a $500,000 factoring line of credit against their receivables, something the company and its broker has already tried to do with numerous factors. They too were also stymied by the judgements and tax liens. 

 

The flexibility of AeroPay Express provided the solution to their cash flow needs. The company might not qualify to use the AeroPay Express card, but there was no reason they couldn't sign up to accept the card from their customers. AeroPay Express, similar to bank cards, has account holders and merchants. To solve the companies cash crunch problem, we needed to free up cash flow from the existing accounts receivables. To do this it wasn’t necessary to add new debt. What we needed to do was to call all the credit worthy customers who have been purchasing from the company and have them sign up as account holders of the AeroPay Express Card. Having them pay with the AeroPay Express Card would give immediate cash to the company while getting the terms they desire. 

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The food processing company contacted their largest customers and explained the benefits of paying their present bills and future bills with the AeroPay Express card. When the customer’s buyer realized that signing up with AeroPay would provide them an additional 30 day extended terms on the existing outstanding balance and that they would receive a rebate on each new purchase going forward, it wasn't hard to persuade them to sign up. 

 

Six of the largest customers with balances of $275,000 in accounts receivables signed up.  With the customers signed up, AeroPay was then able to transfer 98% of the approved open invoices in cash to the bank account of the food processor. With the improved cash flow to the tune of $260,000, the food processor had the working capital they needed without borrowing. It was also more cash than they originally asked for. As an added benefit, since the cash infusion came from the receivables being paid early by AeroPay Express, there was no need to bring on new debt which would have trigger yet another covenant violation with the bank. 

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Without a service like AeroPay Express, the prospects for this company would have been bleak. With all the liens attached to the company and cash flow tight there was literally no other place for them to turn. Receivable financing, asset based lending and factoring would have been an option if the liens could have been cleared and that wasn’t going to happen. Those three options are much too inflexible under the prevailing Uniform Commercial Code law of secured lending. AeroPay Express on the other hand, has none of the legacy restrictions of secured lending and can come to the rescue in many more situations. 

 

If you know someone that wants cash back every time they buy, or a company tired of being the bank to their customers; take a minute, give AeroPay Express a call. 

Evolution of the Credit Card  

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