From Employee to Business Owner: How a $1.75m Factoring Facility Helped Make It Happen

After more than 20 years as an employee, David Mercer was ready to own a business of his own.

He had built a successful career, accumulated a substantial nest egg and reached the point where he wanted to become an entrepreneur. Rather than starting from scratch, David approached a business broker to help identify an established company that suited his experience and operating strengths.

The search eventually led him to Crestline Automotive Supply, a Pennsylvania-based B2B distributor of automotive replacement parts operating from two regional warehouses.

The owners were ready to retire. David saw an established business with a strong customer base, physical infrastructure and years of trading history.

The purchase price was $2.5 million.

A good business, but a timing problem

David was prepared to put $1 million of his own capital into the acquisition, equivalent to 40% of the purchase price.

For acquisitions of this kind, an SBA-backed loan can provide part of the funding. But the process can take several months. David and the seller needed a way to get the transaction completed sooner.

There was also a sizeable asset sitting inside Crestline.

The company had approximately $1.75 million in accounts receivable, equivalent to around 70% of its purchase price.

The problem was that David could not access those receivables before he owned the company.

“That was the frustrating part. I could see the value sitting inside the business, but until I owned the company I couldn’t use any of it to complete the purchase.”

Crossing the gap

TowerCap helped identify a bridge-funding partner willing to provide the remaining $1.5 million required to complete the acquisition.

It was expensive short-term capital, with monthly repayments and an intended term of around four months. Crucially, however, there was no penalty for repaying the facility early.

David could therefore combine his $1 million investment with the $1.5 million bridge facility and complete the purchase.

Once the acquisition closed, the position changed. David now controlled Crestline and its $1.75 million receivables book.

TowerCap immediately began putting a $1.75 million factoring facility in place.

30 days later

Within approximately 30 days of the acquisition, the facility was operational.

The initial availability against Crestline’s eligible receivables allowed David to repay substantially all of the expensive $1.5 million bridge facility, well ahead of its original four-month term.

The factoring facility then remained in place to support Crestline’s ongoing working-capital requirements.

“I went into the acquisition thinking about how I was going to finance the purchase. What changed was realizing that the receivables inside the company could become part of the answer almost as soon as I owned it.”

The structure worked because the funding changed as the transaction changed.

Before closing, David needed short-term capital to acquire the company. Once he owned it, the receivables already being generated by the business could support a much more appropriate form of funding.

The result

David completed the $2.5 million acquisition with $1 million of his own capital and a $1.5 million short-term bridge facility.

Within a month, a $1.75 million TowerCap factoring facility was in place, allowing the expensive bridge funding to be repaid substantially earlier than planned.

Just as importantly, the facility continued to provide working-capital capacity as David settled into ownership and began running the business.

He had not simply found a way to buy the company. He had entered his first months as a business owner with funding already aligned to the way the company generated cash.

This case reflects a real client engagement. Names, locations, quotations and certain identifying details have been changed or adapted to protect confidentiality. The transaction structure, financing challenge and overall circumstances remain representative of the actual engagement.