ABC Billboard Company
ABC Billboard Company (fictional in this case) has 40 billboards generating $560,000 per month of revenue. The main source of revenue comes from media buying agencies in New York, as well as some client direct business on a regional basis. On average, the company experiences 100 days outstanding on collections- some better, some worse.01
First Media Funding (FMF) reviews the financials of ABC Billboard and buys all the active receivables 90 days old for 96% of the total value, as well as paying 94% of 60 day old amounts, then 92% of receivables that are over 30 days. Finally, First Media Funding pays ABC Billboard within 3 days from POP on all new campaigns for 90% of the value.
When a business has average receivable times of, say, 100 days, it has the financial impact of having 3 months of cash taken out of the business on a perpetual basis. When FMF unlocks this trapped cash, the results are stunning. The following page depicts ABC Billboard’s P&L and cash flow before and after FMF.
Explosive Cash Growth…
The top half of the illustration below depicts the income statement for the quarter. On the left, the P&L shows business results without FMF. On the right, after FMF, the effects of selling receivables to FMF creates a deduction that reduces income tax to zero and provides a tax benefit carry-over to the next period.
The bottom half of the illustration reveals actual cash flow from the same period before and after FMF. Once FMF unlocks the trapped cash in the receivable cycle, and continues to pay for new campaigns in 3 days, the true cash flow from operations increases by a staggering 900%.
ABC Billboard company now receives all its payments 3 days from post. In effect, ABC no longer has receivables, and is paid before the campaign cycle ends. Finally, once FMF buys the campaign, client defaults from non-payment is a risk FMF takes, 100% shielding ABC from bad debt.