How Invoice Factoring Helped a Digital Marketing Company Come Back from the Brink
When DX Marketing decided to pivot to a new business model, they had no idea how challenging it would be—or how important invoice factoring would become to their success.
After nearly 25 years, DX Marketing knew that it was time to evolve the business. Print-based advertising was slowly being replaced by digital marketing, and in 2017, the company decided to sell their printing presses and embrace the new medium. But they soon discovered that their decision had an unexpected impact on their working capital.
“As a print shop, we had lots of big printing presses on the floor,” explained Ray Owens, CEO of DX Marketing. “Whenever we needed credit, we always had a lot of fixed assets to borrow against.”
But when the company sold off those assets and invested the funds in their growing digital business, it changed their long-standing relationship with the bank. Without those fixed assets, the bank was no longer willing to extend or increase DX Marketing’s line of credit to support their growth, despite their healthy, increasing accounts receivable.
Turning invoices into assets
DX Marketing quickly started looking into alternative sources of funding and realized that they could use their growing accounts receivable in place of physical assets. When a friend recommended Associated Receivables (AR) Funding, they decided to apply.
The plan hit a snag when it came time to pay off the bank, because DX Marketing’s line of credit was larger than the amount of their total accounts receivable. AR Funding came up with a creative solution: after evaluating the quality of DX marketing’s customers, they issued the first funding draw at a higher-than-normal advance rate so that DX Marketing could pay off the bank sooner. In June 2019, the line of credit was paid off in full, and DX Marketing has never looked back.
“We were a little nervous about the process at first, because our customers had been paying us directly by either checks or ACH transfer for so many years. But AR Funding made it really simple for us. They had all the forms ready and a process in place so that getting our clients on board was easy.”
“To lose the bank’s backing at a critical pivot in our business was devastating. Discovering AR Funding was just a lifesaver.”
A need for faster cash flow
Moving to a digital business model was a smart decision for DX Marketing, but it meant that on top of being unable to borrow against capital assets, they also had to start paying a lot of their expenses faster.
“As a printing business, we paid our suppliers by check,” Owens explained. “As a digital business, our vendors are Google and Facebook, and payment happens in real time.”
Invoice factoring provided DX a consistent and steady cash flow so that a lack of funding never held them back from taking on new opportunities.
An unexpected downturn
In early 2020, the outlook had never looked brighter for DX Marketing. They saw record revenues and were using the capital to hire new salespeople.
Then the pandemic struck and the company had to pivot yet again. The region started going into lockdown, and almost overnight, half of the company’s revenue evaporated. They got through the first few weeks with the help of the Payroll Protection Program (PPP), but as the pandemic continued to impact their business over the longer term, they struggled to cope.
Once again, AR Funding came up with a creative solution to the problem, advancing a steady stream of cash throughout the month, even though DX Marketing’s billings were issued towards the middle and end of the month. This gave the company the steady working capital they needed to weather the heightened unpredictability and continue to focus on growth.
“AR Funding saved our company and saved the jobs of so many of the employees that have been with us for years,” said Owens. “They saw our potential and went above and beyond to help us achieve it, and because of that, we could bounce back.”
Embracing the next chapter
Being able to survive the pandemic ended up leading to an opportunity that changed everything for DX Marketing.
Before the pandemic, the company had caught the eye of a large private equity firm. When the pandemic hit, the firm took a step back to see whether DX had the resilience to weather the downturn, and clearly, they liked what they saw. In October 2020, DX was acquired.
As a portfolio company, DX Marketing now has access to significantly more funding. However, the private equity firm was so impressed with the affordable rates and flexibility that AR Funding offers that they have encouraged DX Marketing to continue factoring their invoices for the foreseeable future.
A partner in growth
Owens is grateful for the liquidity that the relationship with AR Funding has provided, but he says that it’s equally important to have a partner he can trust.
After struggling to stay afloat during 2020, DX is now seeing early indicators of 50% growth this year, a situation that Owens believes would simply not have been possible without AR Funding.
“Having a good partner like AR Funding behind us has given us that comfort level to take on a new level of growth.”
Being able to fund growth has enabled DX Marketing to not only survive the pandemic but play a supporting role in the recovery.
“We have a lot of clients in healthcare, and we are helping them get critical information out there during the pandemic,” said Owens. “The fact that we’ve been able to accelerate our growth so that we can support these companies that are providing critical care is really exciting, and we’ve been able to do it because we have this kind of financial backing.”