Case Study: Financing Business Growth

Business Funding - 5 Min Read

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Ellen Dean’s story is one that will resonate with many small business owners. She and her husband John are the cofounders of DeanSafe, now the number one seller of safes in the state of California. However, Ellen didn’t start out at the head of a successful business. She and John had to grow it from nothing but an idea, with the help of a few good decisions and financial advisers who believed in their vision.

When DeanSafe was just starting out, John went looking for a vehicle loan. He needed a truck so that he could make deliveries to their relatively small client base. However, his finances weren’t in particularly good shape. As a result, many lenders refused to provide them with the working capital they needed. From that moment on, John lost faith in the banking system and decided he would never again ask for a loan.  For the next two decades, the pair struggled to self-finance. However, their perseverance and passion paid off, eventually growing the business into an enterprise with $2.5 million a year in sales.

At this point, Ellen and John wanted to expand. There was just one problem: he didn’t want to go back to the banks and ask for a loan. Maybe it was the fact that he had been turned down decades ago, in spite of having a clear vision for the business. Maybe it was because they had spent the long years since then succeeding on their own terms. In any case, they found themselves at an impasse: “we couldn’t go any further without depleting our savings,” says Ellen, “and we weren’t willing to do that.”

Overcoming Adversity to Loans

Help arrived in the form of a financial adviser who opened the couple’s eyes to other options. He explained in detail how an infusion of capital could allow Ellen and John to grow their business. “He explained that certain debts are good debts,” Ellen recalls. The math was so clear and logical that her John was finally convinced, and the pair eventually took out a real estate loan so that they could purchase the warehouse they had been leasing.

That was just the beginning. Their first successful loan had exposed them to a world of possibilities. Ellen and John soon began looking into dealing with other lenders. Some of them were banks, but others were private companies who offered quicker alternatives to the standard slow moving, long-term agreements most banks prefer.

When the lenders began looking over DeanSafe’s operations, they were a small business with a single location and a modest online presence. Today, the company owns three different retail stores worth approximately $4.5 million, a gigantic warehouse, and a million-dollar ecommerce business. The were able to burst through their ceiling of 2.5 million in sales and are now positioned to sell over 10 million dollars in 2018

DeanSafe’s Extraordinary Pathway to Profit

How did Ellen and John find the borrowing options that allowed them to thrive? Simple: they started small, and invested in the essentials. They began by taking out minor lines of credit. These were used to purchase delivery trucks and moving equipment. Having more equipment allowed them to scale the business, and to steadily grow. Eventually, they refinanced their first loan and used it to purchase additional real estate. Their combined property now takes up more than 10,000 square feet.

Ellen and John have continued relying on their line of credit, with ever increasing limits.  For now, their operations produce enough cash-flow that they can fund their overhead and payroll without borrowing. However, Ellen says the line of credit is instrumental in allowing them  to acquire inventory, property and equipment when it’s needed. “It has helped us tremendously,” she says.

The Advantages of Flexible Working Capital

Ellen believes the extra capital entrepreneurs can acquire by borrowing responsibly provides numerous benefits. The first, according to her, is peace of mind. “Regardless of the ebbs and flows of the business, I don’t have to worry about whether we can cover paychecks for our employees,” she says.  For her, working capital lets the company prepare for anything—even the unexpected.

Ellen says the second major advantage of borrowing working capital is that it allowed her to start importing products from other countries for sale in the United States. “When inventory comes in from normal vendors,” she says, “we have 30 day terms with them, which means we don’t have to pay for them beforehand. With the Chinese safes we started importing, you have to pay in advance.”

DeanSafe currently buys a lot of its inventory through China. Their line of credit made that possible by allowing them to purchase initial inventory from China even though they had no sales. When they sold the inventory, they used the proceeds to pay off the line of credit, then repeated the process.

DeanSafe’s line of credit has also allowed Ellen and John to avoid long term debt. This is because there is no obligation to use a line of credit once the applicant has been approved for it. Lines of credit are flexible, which means they can be used when they’re needed and left alone until such time arrives. “If you need it for operations”, Ellen says, “you have the money there. But you don’t have to take it out—that’s really important. We’ve grown our company from $2 million to $10 million, and we don’t have long term debt of any kind.”

Ellen also makes a point of mentioning that she and John receive substantial discounts for paying off their line of credit early. “We actually get $100,000 in early discounts,” says Ellen, “and that goes right to our bottom line.”

The Moral of the Story: Don’t be Afraid to Leverage Loans to Grow Wealth

At the end of the day, Ellen says a large portion of the credit for DeanSafe’s success is due to their perseverance and their ability to overcome their fear of debt. Their phenomenal growth would never have been possible if they’d continued to self-fund. Ellen is very grateful to have taken the risk.  

Ellen and John are now talking about a possible exit strategy. “We probably need an exit strategy,” Ellen laughs, “but I’m still having fun!” Their ingenuity, perseverance, and willingness to seek help from experienced professionals has helped them build an empire from little more than a dream.  

Call Mulligan Funding at 855-326-3564 to discuss your financing options today!

The information shared is intended to be used for informational purposes only and you should independently research and verify.

Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.