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Financing Challenge:
A growing Direct Marketing company reached a cross-road. The segment in which the Company operates has been very fragmented and in recent years a number of large companies entered the industry and began consolidating it by purchasing smaller companies at multiples ranging form 35 to 40 times Monthly Recurring Revenue ("MRR").

The Company's goal was to increase MRR to a level in which the Company could be sold for an amount that would allow the three shareholders to retire comfortably. To increase MRR the Company had increased its monthly advertising expense.

The Good News was that as advertising expense increased, the number of new customers and Monthly Recurring Revenue (MRR) increased proportionally. The Bad News was that the cost of acquiring new customers was expensive and it took 17 months for the Company to become cash flow positive on a new customer. Thus, in the short-term, as advertising expense increased, MRR increased but the Company incurred losses and reported negative net worth.

This historical performance and negative net worth made it difficult for the Company to access debt financing to execute its business plan of increasing MRR then selling the Company. The Company wanted to avoid investment from an investor which would dilute the equity of the existing shareholders.

The Company was referred to Asset Enhancement Solutions, LLC ("AES") for assistance.

Creative Financing Solution:
AES first prepared a cash basis feasibility analysis to assess whether the Company's objectives were sound and achievable. The analysis showed that although the Company would be cash flow negative in the short-term, it would eventually become cash flow positive and the Company's goal of achieving higher MRR and profitability would be achieved.

AES then prepared a comprehensive business plan with detailed monthly projections that showed the Company would become profitable within 17 months and that its net worth would also turn positive after 26 months.

AES was successful in arranging a $1,650,000 term loan for the Company. Proceeds from the loan were used to increase monthly advertising expenditures, infrastructure and working capital. The Company projects that the proceeds of this loan will allow the Company to increase its Monthly Recurring Revenue from $225,000 in January 2010 to $705,000 per month in November 2012 which should increase the projected purchase price of the Company from $7.9 million to $24.7 million respectively.

The Company is now in the process of executing its business plan.

Neil Seiden, 516-767-0100

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