Payment uncertainty is a matter of course for engineering firms, especially when work is carried out on a subcontractor basis.
As progress and final payments are tied to specific project milestones, payments are often delayed as deadlines shift. As a result, expenses for projects, such as payroll, are divvied out long before payment is received for that work.
This often creates cash-flow difficulties that can eat into working capital for engineering firms. Such was the case for HM3 Engineering Consultants, a firm specializing in mechanical, electrical and plumbing design in the city of San Antonio.
The business was booming, but they didn’t have the cash on hand to cover overhead and payroll.
“We did not immediately get paid on all these big projects – and yet we needed manpower to keep moving forward,” says Margaret Hernandez, head of business development and client relations.
Without working capital, HM3 would be forced to reduce work staff.
“That was not an option, to go backwards since we were growing,” Margaret says.
When Banks Say “No”
HM3 needed a way to fund ongoing projects and growth while they waited for invoices to be paid.
Initially, they faced hurdles.
“At first, we did approach a bank for a small business loan,” says Hernandez. “But we were rejected due to our size and our lack of credit history.”
So the Hernandez family began to search for a financing company that understood the business and offered reasonable loan terms. Also, HM3 wanted to be treated like family.
After all, family is important to HM3.
Alfred Hernandez started the company to take care of his household. He even named the business after them.
“H stands for Hernandez and M3 is for Margaret, Mia and Mika – and that’s me and the two kids,” Margaret explains.
Finding a Partner in Financing
After searching and researching, it was Fast Capital 360 Business Advisor Ron Hibbs who negotiated the funding they needed to support their expansion efforts. Ron initially secured HM3 a business line of credit.
“Ron always seems to contact us when we’re in need. It’s like he has a sixth sense about us and our business,” says Margaret.
They have since added another revolving line of credit, and they continue to draw funds whenever HM3 needs working capital.
A Family Success Story
Margaret says so far the company has used the funding mainly to cover overhead costs and, most importantly, meet payroll demands in the periods between collecting payments.
The revolving line of credit has allowed Alfred and his team of 11 to expand steadily. Last year, the company hit its revenue goal of $650,000, and HM3 is on track to reach its revenue target again as the business continues to flourish.