BEST WAY TO INCREASE AVAILABLE BORROWING BASE?
I am exploring ways to increase the available borrowing base at one of the service companies that I own. We currently have a modest revolver setup but our current lender is evaluating availability based on our outstanding A/R balance not what we bill and collect. Since I acquired the business I have materially shortened the A/R cycle and radically improved cashflow, lowering our total average A/R balance significantly.
It is bizarre to me that all the lenders we have engaged to date are all looking at the total amounts outstanding over and above what is actually billed and collected which has increased yoy.
This service business has no hard assets and the cost to maintain this undrawn line of credit is nil. The reason for seeking to increase availability is multi-faceted:
(A) More availability allows us to increase our opportunity cost when looking internal and external
(B) Never hurts to be very prepared for a rainy day
(C) From a treasury management perspective, we can dedicate more of our capital available for acquisitions
What have been the community's best mechanisms for securing larger or lines of credit for service-based businesses?