Working Capital

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.

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.

SG Credit Profile: Cash Flow

The Company: A family-office backed provider of mental and behavioral health services catering to Medicaid patients.

The Financing Situation: The Company was experiencing high growth due to a combination of strong demand and positive regulatory tailwinds. To capitalize on this growth, the Company sought a non-dilutive debt facility to fund expansion opportunities requiring hard upfront costs.

The Solution: SG was able to underwrite the history of profitability, variable cost nature of the business, and positive growth trends. SG structured a $5.0 million credit facility to provide the Company with the immediate capital it needed to open new locations in its pipeline as well as a delayed draw component to scale with the Company.

The Company: Midwest-based specialty retailer of mattresses and accessories. The Company sells through 50+ stores as well as its Company-owned DTC eCommerce channel.

The Financing Situation: The CEO was looking to complete a management buy-out of the Company. The business was owned by a family office that acquired it through a restructuring a few years ago. After negotiating the purchase price, the management team needed additional capital to supplement their equity contribution to complete the acquisition and provide sufficient working capital. A traditional inventory borrowing base alone would not generate enough liquidity to fund the acquisition and support the working capital needs of the business.

The Solution: SG provided a comprehensive solution by funding two tranches of term loans. The first tranche was supported by a borrowing base (advances against inventory) and required interest-only payments until maturity. The second tranche was structured based on the cash flow of the business with required interest and principal payments based on a 36-month amortization schedule. By using a hybrid approach of leveraging the company’s assets and cash flow, SG was able to provide the needed liquidity and did not require warrants or other equity instruments, which would have diluted the buyer’s ownership.

The Company: Southeast based consumer credit and identity solutions software-as-a-service provider, majority owned by founder & CEO Ed Margolin. Visit Fraud Protection Network’s website to learn more.

The Financing Situation: The Company had previously financed its growth with a combination of equity and convertible notes.  With new product rollouts and strategic partnerships in 2020 creating accelerated growth, the Company was seeking non-dilutive capital to finance its working capital needs and extinguish convertible notes in order to preserve equity.

The Solution: SG was able to quickly get comfortable with the transaction due to the rapidly growing monthly recurring revenue, strong industry retention rates, and overall financial health of the company.  SG structured a covenant-lite $2.5MM loan with a tailored repayment schedule around cash flow that bought out the convertible notes to avoid further dilution and provided additional liquidity for the Company to continue its growth trajectory without equity support.

This transaction demonstrates SG’s ability to underwrite SaaS / recurring revenue loans. While many of you know us as a cash flow based lender, we now provide non-dilutive SaaS / recurring revenue loans requiring creativity, flexibility, and speed to close. Click HERE for a link to our SaaS / recurring revenue one pager to learn more.

The Company: Founder-owned managed service provider offering leading SD-WAN and edge solutions to businesses around the world.

The Financing Situation: The Company demonstrated significant year-over-year growth and had recently signed several large, multi-year contracts with new customers. The Company needed upfront working capital to invest in additional people costs in order to effectively perform on upcoming contracts. Additionally, due to the timing of annual payments, monthly cashflow could be lumpy. The Company needed a flexible, quick-to-close solution and the owners preferred to finance the Company’s capital need with non-dilutive debt rather than equity.

The Solution: SG Credit was impressed with the Company’s large recurring revenue base, strong pipeline of signed contracts and substantial enterprise value. SG Credit provided a second lien $1.5MM loan behind the Company’s existing factoring relationship, which provided the Company with enough working capital to smooth out monthly cashflow and successfully perform on the recently signed contracts.

The Company: Enterprise SaaS platform that enables companies to prepare and oversee RFPs and other business responses with speed, accuracy, and compliance. Recurring Revenue: $4.5MM.

The Financing Situation: The private equity backed Company was emerging from an operational restructuring and planned to rebuild its tech platform to increase functionality, improve UX, and drive sales. The Company’s existing bank lender was not willing to finance these initiatives so SG Credit was approached to refinance the existing bank lender and provide additional liquidity so the Company could execute on its plan.

The Solution: SG Credit provided the Company with a bifurcated loan structure consisting of a $1MM interest-only loan to refinance the existing debt and a $1MM term loan to finance the Company’s growth initiatives.  This structure provided the Company with 12+ months of runway and allowed the Company’s existing bank lender to exit the credit as desired.  SG Credit was able to close the deal within 3 weeks after quickly getting comfortable with the Company’s recurring revenue, client base quality, low churn, strength of the new management team, and continued shareholder support.

The Company: Full-service mechanical contractor located in the Midwest that provides HVAC, plumbing/piping, and other mechanical services to the commercial and industrial/manufacturing sectors. Revenue: $90 MM | EBITDA: $5 MM.

The Financing Situation: The Company recently raised capital from a private equity sponsor that has invested in several construction services businesses.  The new ownership group wanted to refinance its existing credit facility, but traditional bank financing was not an option as the Company typically acts as a subcontractor on construction projects that are primarily on paid-when-paid contracts.  The ownership group also wanted a financing partner that could grow with the business.

The Solution: SG Credit Partners teamed up with CapitalPlus Construction Services to provide a $13.0 MM structured factoring facility based on the Company’s strong ownership group, diversified customer base, and leverage profile.

For more information on CapitalPlus Construction Services, please contact:
Scott Applegate
President
applegate@capitalplus.com
865.670.2345

The Company:
Privately owned wholesaler of licensed toys, collectibles, and housewares.
Revenue: $22mm | EBITDA: $2.8mm

The Financing Situation:
The Company needed additional working capital to purchase inventory in advance of the holiday busy season. The Company has a flexible asset-based credit facility from FSW Funding (“FSW”), however, given the seasonality of revenue, the Company’s current accounts receivable balance did not provide sufficient availability to purchase the inventory needed for its busy season.

The Solution:
Super G was able to quickly get comfortable due to historical financial performance, strong management team, and funding into the Company’s busy season. Super G provided a non-dilutive $1.0mm second lien loan behind FSW with repayment structured around seasonal cash flow, which enabled the Company to purchase inventory to meet seasonal demand. The transaction closed in less than two weeks.

For more information on FSW Funding, please contact:
Adam Keck
Senior Vice President
akeck@fswfunding.com
480-440-2496
www.fswfunding.com

The Company:
Family office backed designer, marketer and manufacturer of specialty dancewear.
Revenue: $18mm | EBITDA: $2.4mm

The Financing Situation:
The Company had recently established an inventory based credit facility with Crossroads Financial to fund general working capital needs and was in need of additional liquidity during its low season (April to October) for inventory purchases and general operating expenses. Given the recent inception of the relationship and low inventory asset base due to seasonality, Crossroads Financial was not comfortable providing an out of season over-advance stretch piece.

The Solution:
Super G was able to get comfortable with the business due to historical performance, strong recurring customer base and consistent seasonal trends. Super G provided a non-dilutive second lien loan with repayment structured around seasonal cash flow, which successfully bridged the Company through its low season to busy season collections (November – February). The transaction closed in less than two weeks.

For more information on Crossroads Financial, please contact:
Lee Haskin
CEO
lhaskin@crossroadsfinancial.com
561-997-8626

Jarrett Levy
Business Development Officer
JLevy@crossroadsfinancial.com
561-997-8627