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In November 2021, SG Credit Partners acquired Stonegate Capital and announced its entry into asset-based lending with a focus on high-growth consumer products. The result of our combined companies is the ability to deliver a complete range of tailored credit solutions to the lower middle-market.

Our unique platform now provides structured credit facilities, ranging from $2MM – $20MM, to businesses across the country primarily via three verticals:

Software & Technology

SaaS, tech-enabled services, and recurring revenue companies seeking non-dilutive capital

• $3MM – $15MM+ ARR
• Strong gross margins & retention
• Path to profitability or sufficient liquidity

Consumer Products

Innovative, emerging brands and consumer-oriented businesses with B2B and/or D2C channels

• $10MM+ revenue
• Demonstrated brand value
• Path to profitability or sufficient liquidity

Lower Middle Market

Structured credit solutions to lower middle-market companies ($10MM – $100MM revenue) and entrepreneurs across a wide variety of industries. We can underwrite based on:

• Cash-flow
• Collateral
• Strong / secured HNW guaranty
• Hybrid combination of the above

We can structure facilities with revolvers (including stretch components), senior term loans (including delayed draws), second / split lien term loans, or unitranche loans, and we are not limited by use of proceeds.

For our valued partners who have known us for many years, we’ve continued to evolve and want to clearly communicate our enhanced capabilities. For those of you who we have met more recently, we look forward to providing flexible and creative credit solutions to you and your clients.

We continue to maintain our national footprint with regional offices in Los Angeles, Newport Beach, Denver, Chicago, Atlanta, and Washington, D.C.

Click here for a link to our one pager.

SG Credit Profile: SaaS

The Company: A leader in cloud adoption and management solutions. 

The Financing Situation: The Company was seeking non-dilutive growth capital to execute on its substantial pipeline. 

The Solution: SG was supportive of the deal due to the Company’s recurring revenue metrics, high retention rates, positive growth tailwinds, and strength of the management team. 

To learn more, please click here to view the full press release. 

SG Credit Partners recently announced its acquisition of Stonegate Capital Holdings (“Stonegate”) and its entry into asset-based lending with a focus on high-growth consumer and recurring revenue verticals.

The acquisition of Stonegate establishes SG Credit Partners as a leading lower middle-market credit platform delivering a complete range of credit solutions and provides a market leading position in the consumer vertical, and revolving capabilities throughout the SG Credit platform. The acquisition also strengthens SG Credit’s product platform which includes the ability to structure senior and junior debt as well as provide both cash flow and asset-based loans.

Marc Cole, Co-Founder and Chief Executive Officer of SG Credit Partners met with Michael Toglia, Publisher of ABL Advisor to discuss this strategic acquisition and how it uniquely positions SG Credit Partners to expand their platform to offer specialized solutions in the middle market.

ABL Advisor: The recent announcement signals SG Credit’s entry into the ABL space. To begin, why is SG entering the ABL space?

Photo of Marc Cole - Co-Founder and Chief Executive Officer - SG Credit Partners, Inc.

Marc Cole: Great question Mike and one that I have been asked a lot recently. We are entering what we call the specialized ABL space for two reasons. Firstly, this acquisition and resulting revolver capabilities strengthen our platform. We raised institutional capital a few years ago with the sole purpose of building a broad credit platform focused on the lower middle market, specifically entrepreneur-owned businesses. We now have an institutional credit platform focused on loan sizes up to $10+ million in a part of the market that is severely underserved. What makes our platform unique is our ability to structure deals around a broad set of borrower types, use of proceeds, and situations. No other platform serving the lower end of the market has our team, reach or capabilities.

The second reason and just as important is that our business evolved, and we recognized the need to be a thought-leader in key verticals. Stonegate was a first mover and thought-leader in providing ABL solutions to sponsor-backed, high growth consumer businesses and SaaS businesses. Stonegate’s SaaS capabilities focused on sponsor-backed companies are purely additive as SG Credit has completed approximately fifty SaaS financings to mostly bootstrapped companies. I started my career in private equity providing growth equity for SaaS businesses and very much understand the needs of founders in this sector.

The opportunity to obtain revolver capabilities across our platform, diversify sourcing channels to work with sponsors and become a market leader in highly sought-after verticals was too much to pass upon. It’s also important to say we ultimately did this because of the team at Stonegate. What we did not want to do was directly compete with the broader ABL industry – who we still very much view as our partner. We never considered entry into that market as that shipped sailed as conventional ABL is becoming mature and a race to obtain scale.

ABL Advisor: Why Stonegate? To clarify, what made the Stonegate business and team so attractive to SG Credit?

Cole: The team, their track record and clear, differentiated approach to the market. Our entire business and strategy are based on differentiated products, genuine people and markets we can lead. The consumer vertical, just like the SaaS vertical, is starting to get a lot of attention from the lending community. These specialized industries require deeper understanding of collateral, similar to other specialized industries such as healthcare and traditional retail. We get excited about verticals where we can be a true market leader and we can now say that about consumer and SaaS. In addition, the team at Stonegate is fully onboard and these opportunities are few and far between to work with a like-minded team who treats a business like it’s their own. This stems from the fact that Stonegate was founded by a beloved industry visionary in Darren Latimer, who hand-picked an incredible team that remains in charge. We never take the people aspect for granted.

We ended up getting the trifecta of people, platform and market leadership that also provides our combined company with national reach and scale.

ABL Advisor: Please tell us about the market you will be pursing in the ABL space. For example, company revenue levels, transaction ranges, credit profiles, industry focus and ABL transaction types.

Cole: Key priorities are high-growth consumer facing businesses as well as emerging SaaS businesses. Secondarily, we will pursue true special situations that don’t fit the box of traditional ABL and that provide premium pricing. Typical non-SaaS revenues range from $10+ million to over $100 million and facility sizes range from $2+ million to $10+ million. SaaS revenues typically range from $3 million in ARR to $10+ million.

The credit types are typically transitory in nature in that these companies are typically trading profit for growth and highly focused on creating exponential equity value. Stonegate has terrific relationships with the consumer and SaaS investment communities who prefer a lender that understands their industries and can underwrite growth. Stonegate became a preferred partner by being able to strategically make IP or enterprise loans to complement their ABL structures.

I also believe it is important to say what we don’t want to do, which is to compete in what we call generalist ABL defined as the traditional manufacturer, distributor and service businesses. There is simply too much competition in this market with the industry leaders having dominant positions.

ABL Advisor: Tell us a bit about how the SG Credit team will work with the Stonegate team and how the two will “attack” the market to achieve greater market share? In other words, does “1+1 = more than 2”?

Cole: Firstly, we are now one company. The best way to think about our go-forward strategy is one national originations team, but two separate business units with dedicated leadership, underwriting and portfolio teams. Much like how many groups use one team to market factoring and ABL but keep underwriting and portfolio separate for both. Ultimately, the core products – ABL and cash flow – are very different and we recognize the need to keep underwriting and portfolio as separate business units.

The 1+1=3 comes into play for clients that have a larger term component than ABL and it makes sense for SG Credit to control the revolver. Vice versa, Stonegate plans to go deeper into its verticals, and often many of these companies need IP or enterprise value term loans. What won’t change is the core product offering and special DNA that each company possesses. We believe Stonegate’s industry expertise combined with SG’s non-ABL product expertise provides for significant opportunity to deliver complete solutions to the market. The same folks underwriting and managing credits will still be doing so, only now they will have more capabilities to offer clients and the market.

One thing we want to make clear is that SG Credit’s partnership approach to working with other lenders hasn’t changed. ABLs and banks should still call us anytime they need a partner. The core SG business has expanded over the years but partnering with banks and ABLs is still a critical component of our business strategy.

ABL Advisor: How will the businesses interface? Will the leadership team at Stonegate remain in place and how will the two teams (SG and Stonegate) work to create a cohesive approach to the market?

Cole: The leadership team at Stonegate will absolutely remain in place. Planning has already begun for a cohesive approach to the market with the goal of simplifying messaging and educating referral sources. Acquisitions are never easy, but the core Stonegate team has been there from the beginning, so the only difference is that we are super-charging their originations. The companies have a common culture so putting them together is not that difficult. The senior executives have known each other for many years and in some cases have been colleagues.

ABL Advisor: Competition is certainly fierce today among bank and non-bank lenders. What can the market expect to see from SG in the coming years and what do you see as a major trend in the coming 12 months?

Cole: The market is fierce, which is why we and every market participant should be re-thinking their business. There are three major trends happening right now: Consolidation, Scale and Specialization. For us, it’s all about specialization. We are very strong in several verticals with a focus on loan sizes below $20 million. These verticals are consumer products, SaaS, high net worth and special situations. Our strategy is to have three to five direct competitors within each vertical where we can get premium pricing rather than fifty direct competitors in conventional lending opportunities.

Consolidation and scale have transformed the ABL industry and now more than ever you need specialization as a point-of-difference. We compete and go after specialized industries where we know the market and know where we can go deeper as part of getting premium returns. Now that many other platforms have achieved scale, we believe the next battleground will be consolidation of specialized verticals. Recent market comps including Stonegate suggest as much.

ABL Advisor: Thank you for joing me today Marc. Do you have any parting thoughts?

Cole: It’s an exciting time to be in this industry. We are in the midst of constant change whether it be M&A, technology or leadership change. We started the predecessor to SG Credit back in 2015 and it’s almost unrecognizable how far we have come. That said, we believe we are still in the early stages of what we can become as we continue to add like-minded talent and evaluate expanding into new businesses.

Link to article here.

SG Credit Partners announced its acquisition of Stonegate Capital Holdings (“Stonegate”) and its entry into asset-based lending with a focus on high-growth consumer and recurring revenue verticals. Stonegate will operate independently as a new division of SG Credit and continue to build upon its position as a market leader in non-bank direct lending. The acquisition of Stonegate establishes SG Credit Partners as the leading lower middle market credit platform delivering a complete range of credit solutions.

Headquartered in Chicago, IL, Stonegate will continue its strong history of providing credit facilities ranging from $2 – $10+ million to companies, operating in the U.S. and Canada. Target markets include providers of goods and services to the consumer sector, including food & beverage, naturals, beauty, ecommerce, fashion, and recurring revenue businesses. “We are excited to welcome the Stonegate team and continue financing leading consumer brands,” said Marc Cole, CEO at SG Credit Partners.

Acquiring Stonegate provides both a market leading position in the consumer vertical, but also revolving capabilities throughout the SG Credit platform.  The acquisition of Stonegate strengthens SG Credit’s product platform including the ability to structure senior and junior debt as well as provide both cash flow and asset-based loans. “With a broader product set, the next phase of growth for SG will be expanding into more verticals”, said Charlie Perer, Head of Originations.

SG Credit has evolved from a niche lender to a family-office backed credit platform with national reach, product breath and vertical industry expertise.  “Our goal all along was to leverage SG Credit’s national distribution to layer on businesses with the goal of building the preferred non-bank lender in the lower middle market, focused primarily on entrepreneurs,” said Mack McNair, Chairman of SG Credit.

Link to article here.

SG Credit Profile: SaaS

The Company: A leader in channel management automation for enterprises selling through channel partners.

The Financing Situation: The Company was seeking capital for product development, to expand its team, and to execute on growth opportunities in its pipeline.

The Solution: SG structured a $1.5 million non-dilutive term loan supported by the Company’s recurring revenue base. SG was able to get comfortable based on the Company’s comprehensive product suite, ARR growth, strong SaaS metrics, and experienced management team.

SG Credit Profile: High Net Worth

The Company: A single-asset real estate holding company owned by a high net worth technology executive (“the Guarantor”).

The Financing Situation: The Guarantor agreed to acquire a lakefront residential land parcel in an emerging city. Although the Guarantor had the asset base to fund the purchase with equity, much of his net worth was tied up in fully vested stock options that had punitive tax consequences upon conversion. Additionally, the seller was fatigued and wanted to close in less than three (3) weeks, meaning conventional bank financing was not a viable option.

The Solution: SG underwrote the real estate as well as the outside personal assets of the Guarantor. Given the location and liquidity of the underlying real estate collateral, coupled with the strength of the Guarantor’s personal balance sheet, SG was comfortable providing a high LTV loan. SG moved quickly to meet the timing constraints and closed within three (3) weeks from executed term sheet.

This transaction underscores SG’s ability and willingness to structure and underwrite collateral based / guarantor-based loans. While many of you know us as a cash flow or technology (SaaS) lender, we now provide special situation (balance sheet) loans requiring creativity, flexibility, and speed to close. We also have a strong interest in providing customized solutions for liquidity constrained high net worth entrepreneurs. 

SG Credit Profile: SaaS

The Company: A cybersecurity software company providing best in class security operations, compliance, and consulting services.

The Financing Situation: The Company was seeking non-dilutive growth capital to expand its cloud-based cybersecurity platform and customer reach.

The Solution: SG was able to get comfortable with the transaction due to the Company’s recurring revenue metrics, strong retention rates, management depth, and ongoing support from key investors.

To learn more, please click here to view the full press release.

SG Credit Profile: SaaS

The Target: Corporate travel and entertainment software, data integration, and business intelligence (BI) provider for large enterprises and travel management companies.

The Buyer: Enterprise software operating company backed by private equity.

The Financing Situation: The Buyer was seeking a debt facility to supplement the equity contribution made to purchase the Target.

The Solution: SG structured a $4 million term loan to support the closing of the acquisition. SG was able to get comfortable based on the Company’s recurring revenue, strong SaaS metrics, experienced management team, and the strength of the Buyer.

The famous Russell Crowe movie about an ancient Roman Gladiator battling stronger and better armed opponents is what every BDO feels like in the field. Step into our ring for a moment: Learn how to build a network, land a client, compete against formidable competitors, sell a deal internally and make time for networking after a busy day. This is a tactile role, and we are asked to win constantly while given the same tools or weapons as all other entrants.  The flag of your bank or non-bank only goes so far in the arena of competition. Sure, the brand matters, but there is a reason some Gladiators are better than others. To be excellent requires mastering necessary and disparate skills – part credit, part sales, part project manager and most importantly politician. A strong Gladiator is the face of his or her organization and a true brand in their own right.  This is the heart of being a Gladiator – you are in the arena on your own fighting to win.

Let’s face it, as BDOs we are all told our platform or brand is the best and then sent into battle with and against each other. Like all other competitive activities, most folks see the end result, not the process or the nuances. The hours are long, the stress is high and things change on a dime. If anyone wants to be a Gladiator, then follow one of us around for a week and see whether you are up for the challenge. Let’s start here: When everyone else goes home at night we go to a networking event or find ourselves on the road. While everyone else is off on weekends we are taking calls and working on a proposal. It literally never stops as we are the engine that needs to keep running so the pipeline stays full. We are also always the first to be sacrificed in any downsizing. No other role deals with the quotas or conflicting message of being asked to book the perfect deal with no risk, constantly. While everyone else tells us how to fight, we actually have to step into the arena and know how to win a deal. It’s easier to be a spectator than in the actual arena getting bruised.

Let’s talk about the arena for a moment. 100+ days a year in a hotel, competing in multiple arenas across many markets and managing meaningful internal resources. While the Gladiators might change from city-to-city, the arena typically stays the same.  Each market is by and large the same – there are market makers and market takers – with the big institutions moving the markets with low-cost pricing whenever they really want to take more share. This just means you will never be the lowest priced or most aggressive in each deal bake-off.  More often than not, you are competing against another Gladiator with better weapons. This is why our business is all about the Gladiator and less about the institution, although the institution does matter. No one ever said, “Bet on the horse, not the jockey.”  Our brand as a Gladiator matters, the relationship with the client matters and knowing how to win matters. Step into the hardest arena in lending – lower middle-market asset and cash flow lending.  

The best Gladiators put the pieces together over years, know their weapons, arena and competition. There is a reason certain BDOs dominate certain markets. The platform does matter and should not be undersold, however, knowing how to sell a platform and what can be approved is pure art in this day and age.  Bank-ABL is still a hard credit product as it is still risk-rated and there is a reason a true ABL deal is often not being done by a bank. The margins have never been lower while competition never greater, so the the level of expertise needed to land these deals should not be underestimated. We are in an unforgiving market where advisors don’t forget being left at the altar. BDOs are often in a precarious situation fighting for a tough deal that will surely get done somewhere. This is why we call it the arena and why the good BDOs can navigate the internal and external forces to book assets and win.  

What’s great about the arena of lending is that many of the Gladiators often socialize outside the arena but are fierce opponents inside. It’s the truest sign of respect and what makes our industry so great is that there is a real sign of admiration amongst the folks fighting the battles. This article is dedicated to all the BDOs in the arena who are the real Gladiators. This is our arena and what we live for.  I look forward to seeing my fellow Gladiators in the Arena! 

The author appreciates feedback and he can be reached at charlie@sgcreditpartners.com.

Link to full article here.

SG Credit Profile: SaaS

The Company: Provider of procurement and spend management software to mid-market businesses.

The Financing Situation: The Company had legacy bank debt from a previous acquisition that was underwritten primarily by cash flow, not recurring revenue. The Company’s growth plan called for re-investing all excess cash flow into growth, which conflicted with the profitability-based covenants of its existing credit facility. The existing bank lender was unable to re-underwrite its loan based on recurring revenue so sought to exit the loan at maturity. The Company needed an experienced tech lending partner who better understood its SaaS business model and could scale with the Company as it executed on its growth objectives.

The Solution: SG structured a $2.75 million term loan to pay off the Company’s existing lender and provide additional liquidity to support its continued growth plan. SG was able to get comfortable based on the Company’s recurring revenue, strong SaaS metrics, and experienced management team.