Bob has his cash in the bank making less than 0.20% APR.
- $750k in AP due to John
- 0.20% APR on cash investments
- Pays suppliers in 45 days
- Bob doesn’t realize there are other options
- Earns a return of 6% APR
- Strengthens his supply chain
- Lowers his cost of goods and improves his profit
John borrows money from a bank to keep his business liquid.
- His bank rate is 7.5% APR
- Can only borrow up to 80% of his accounts receivable
- Lengthy paper work and collateral documentation
- Personally guarantees the loan
- Reduces borrowing cost by 20%
- Gets paid 45 days sooner
- Receives $144,000 more cash than from a bank
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