For Derrick Olson and his team of media blasters, steel fabricators and specialty coaters, it’s all about putting in an honest day’s work—an approach that has served them well since opening their doors in 2014. But compensation for an honest day’s work isn’t always immediate. When customers take 30 days to pay (or longer), and supplies need to be bought before every job, expenses often outpace incoming receivables. Derrick needed a way to keep a positive balance of working capital.

Based out of Wagoner, Oklahoma, Olson Custom Blasting specializes in surface preparation and coatings for a variety of substrates serving an equally diverse customer base, from antique car enthusiasts to oilfield distributors. With every project they undertake, the team is committed to delivering a high standard of craftsmanship. As one customer put it, Derrick and crew, “are great to do business with. Prices are very fair, work is far better than I would receive elsewhere and the turnaround time is unbelievable.”

But despite consistent high-praise and a steady stream of work, the fluctuation of cash inflows and outflows can put Olson Custom Blasting under financial duress. “I have jobs coming up and material I need to buy, but my deal is this: I have to wait 30 days to get paid,” says Derrick. “I’m not a big business, so sometimes it’s hard to make it through until you get that check.”  

But see his company through he has. When the business account gets low, Derrick seeks short-term financing. With a healthy balance of working capital, Derrick has enough cash to sustain operations, procure materials for new projects, cover emergency expenses and make strategic investments in the future of his company.

Cash Flow Crunch: A Big Problem for Small Businesses  

Rules of accounting define “Profit” as revenue minus expenses. By this measure, a business may appear like the picture of financial health. But what this number doesn’t factor in is the consideration of time—exactly when cash moves in and out of business.

Though a P&L statement may show a profit, a business’s bank account could routinely be in the red if outflowing cash is significantly higher than incoming capital at any point in time.

Effective cash flow management is a big problem for small businesses of all sizes. In fact, it’s considered a top 5 challenge. And among failed SMBs, 60 percent cited cash flow as a cause.

For Olson Custom Blasting, cash flow problems are a harsh, but inevitable, reality. “It’s just the nature of the work,” explains Derrick. Payment is collected once, at project completion, and invoice terms are 30 days. The business fronts the cost of entire projects. As a result, a significant portion of working capital is tied up in work in progress.

Though a sizeable payday is often on the horizon, Derrick must sustain operations and procure job materials until then. And when an unforeseen business expense rears its head, as was the case when Derrick’s welder went down days before a big job, the crunch can become crippling.

It’s a struggle especially apparent in the construction industry. In a recent survey of construction firms, 84 percent reported problems with cash flow, and 19 percent said they dealt with cash flow issues constantly. If left unaddressed, cash flow problems can bleed into every aspect of a business. In fact, 1 in 4 respondents says insufficient cash flow prevents their companies from growing, while others report it affects their ability to run payroll or accept new work.

To avoid these consequences and ensure immediate financial obligations are met, Derrick relies on bridge financing. “If the account is running low and I know I’ve got to buy a couple-thousand-dollars worth of materials, or I need money in the account to cover an ‘uh-oh’ expense, that’s when I pull the trigger and seek funding,” says Derrick. “That way I don’t stress; I know the money’s there.”

Bridging the Cash Flow Gap with Short-term Financing

In his quest for capital, what mattered most to Derrick was speed and convenience. He’s not an office man. On any given day, you’ll find him in the shop or on a job site, immersed in the work at hand. That’s why Derrick was drawn to the alternative lending space.

With their streamlined and technically-driven application process, online lenders offered Derrick precisely what he was looking for: Fast funding with minimal hassle.

  • Fast Funding: Applying for a loan from a traditional bank can be a lengthy process. After collecting and submitting documents, applicants may need to schedule a phone call or go to a local branch to discuss the application and qualifications in person. It can take three to four weeks to hear back, and days to receive the funds. Many alternative lenders have streamlined the application and approval process. Applicants submit everything online and often hear back within a day. And when a lender approves an application, it may be able to send the funds as fast as same day.
  • Minimal Hassle: Whether an applicant wants to open a line of credit or apply for a term loan, they need to go through a lender’s underwriting process. Traditional banks often have stricter requirements than alternative online lenders. For example, many banks will only lend to businesses that have been open for at least two years. To qualify, they often require applicants to submit a formal business plan, have good credit and pledge business collateral (such as equipment, supplies or invoices). Alternative lenders are less risk-averse, extending access to capital to a wider variety of business owners.

Three Simple Steps to a Positive Working Capital Balance

After deciding to secure funding through an alternative lender, Derrick’s search led him to Fast Capital 360. He wanted fast and easy, and that’s exactly what Business Advisor, Kris DiRenzo, and Funding Administrator, Casey Rothwell, delivered.

After a few conversations with Kris and Casey, Derrick quickly secured financing to cover his immediate cash flow needs.

A few months later, Derrick found himself back on the phone with Kris.  And since his initial funding instance in 2016, Derrick has worked with Fast Capital 360 eleven times. “We’re now at the point where I can call Kris and say, ‘Just go ahead and do your thing and fund me.’ It’s been a blessing to work with Kris and Casey because they sure help me out and make things happen for me.”

And for Kris and Casey, it’s about securing the best available financing option. As Kris explains, each time he, “reviews current needs, statements and balances and what amount and options are available. Then, we put together a game plan to ensure he has access to funds when he needs it.”

According to Derrick, the process is seamless. “They email everything to me. It’s a three-step process: read this, fill this out, give me these statements and that’s it. In one day, I’m funded.”

For Derrick, that means he can get back to what’s most important—his work.  

Borrowing Responsibly

Admittedly, Derrick had some reservations when taking out his first loan. “I was just hoping I was going to be able to pay it back,” explains Derrick. But with each funding instance, Derrick addresses these reservations by borrowing responsibly. “I know I have work coming up and receivables coming in, so I know I can afford it,” says Derrick.

He does this by creating a specific plan for how the money will be used. For instance, procuring material for a job or purchasing a new piece of equipment that will result in a positive return for the business. He also takes a close look at forecasting to ensure a clear exit strategy exists—which in his case is upcoming work or incoming receivables.  

The Financial Freedom to Meet New Needs and Focus on the Future

Access to short-term financing has helped Derrick avoid the pitfalls of cash flow shortfalls. Not only has he successfully sustained operations, he also had the cash on hand to procure material for new work and purchase and replace essential equipment. “It’s been a tremendous help,” explains Derrick.

And with the assurance of easy funding, Derrick has set his focus on the future. He recently purchased an epoxy paint sprayer. “What I’m trying to step into now is doing more epoxy coatings for the oil field industry,” he explains. “Going inside and coating the inside of big tankers that haul acids and crude oils.”

If he can break into and service this segment of the industry, Olson Custom Blasting could see a ten-thousand dollar increase in weekly earnings.

For Derrick, the key to success rests in honest, hard work and trusting his intuition. “If you feel it in your gut that you need to pursue an opportunity, you should do it and get funded. It will make your future that much easier.” After all, growing the business is the most important project a small business owner can pursue and undertake.