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Financing Challenge:
A For-Profit school providing services for students with special needs required a line of credit to support its rapid growth. The School is very prominent in its field and some students live as far as 50 miles away and commute to the school on a daily basis. Tuition is paid by each student's respective School District. Bureaucracy, combined with fear resulting from the recent school scandals has slowed payments from School Districts to a trickle.

The School is providing services to an increasing number of students from New York City. The bad news is that New York City contractually pays the School 180 days after the date of service.

To benefit needy students, the School will often start children in the program while the child's family waits for formal approval by the School District. While this benefits the child, the School's cash flow deteriorates further.

As a privately held company, the "tax oriented" School was unable to obtain the appropriate amount of financing from a traditional bank due to insufficient corporate and personal net worth and inadequate cash flow.

Creative Financing Solution:
Asset Enhancement Solutions, LLC successfully arranged a $1,000,000 Revolving Line of Credit with an aggressive financial institution. The line of credit was collateralized by the School's accounts receivable from School Districts. Typically, lenders exclude from eligible collateral, accounts receivable greater than 90 days old, therefore reducing the amount that a company can borrow on its line of credit.

Asset Enhancement Solutions was able to negotiate special terms from the Lender for accounts receivable from the New York City School District. These terms allowed the School eligibility on accounts receivable up to 180 days from the invoice date. The interest rate on this Revolving Line of Credit was Prime plus 1%.

This Line of Credit allowed the Company to continue its rapid growth and to expand to additional locations.

Neil Seiden, 516-767-0100

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