Business Products & Services

SG Credit Profile: Technology (SaaS)

The Company: Software as a Service platform that provides AI-powered marketing analytics. The platform provides an end-to-end suite of tools that allow clients to research and measure their marketing investments and maximize ROI.

The Financing Situation: The Company’s existing bank credit facility was no longer a strategic fit and the Company was seeking additional non-dilutive capital to help execute on its growing sales pipeline.

The Solution: SG was able to get comfortable with the transaction due to the Company’s strong management team, blue chip customer base, enterprise value, and its supportive cap table. SG provided a $2MM senior secured facility with an interest-only period and modest amortization to payoff the bank and support the Company’s ARR growth with non-dilutive capital.

The Company: Sponsor-backed document scanning company that provides an array of workflow optimization services. The Company’s scanning service model, coupled with its cloud-based data hosting platform, enables it to transform physical documents to actionable digital data for its customers. Recurring Revenue: $12.5MM | Services Revenue: $3MM.

The Financing Situation: For the past few years, the Company was focused on developing its technology platform and implementing several key channel partnerships. Though the Company expects these dynamics to be fruitful in the long-term, the short-term effect was a decrease in profitability. The Company’s existing lender had provided a traditional asset-based line of credit based on eligible accounts receivable. This structure did not provide the Company with the flexibility it needed to expand sales and marketing initiatives through its new channel partnerships. Lender and borrower fatigue set in, so the Company went to market to find a debt partner that could a) look for value beyond just the assets, and b) scale with it as it executed on its growth strategy.

The Solution: SG was able to get comfortable with the Company’s strong pipeline of contracted revenue, return to profitability, revenue retention rate greater than 90%, and plethora of expansion opportunities through its new channel partnerships. SG provided a senior secured, $3MM growth capital loan structured around recurring revenue, proforma cash flow and total leverage.

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:

Privately owned consumer debt collection agency.

 The Financing Situation:

The Company needed capital quickly to move on opportunistic portfolio purchases as well as working capital cushion while collection curves ramped up.

 The Solution:

SG was able to quickly get comfortable with the transaction due to the value of dedicated portfolio collateral as well as a strong personal guaranty from the owner. SG worked quickly to provide a $1.5MM funded ($2.5MM total) facility in a first lien position with interest-only payments. Closing timeframe was one week.

This transaction highlights SG’s ability to structure and underwrite collateral based / guarantor based loans. While many of you know us as a cash flow based 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 illiquid high net worth entrepreneurs.

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:
Sponsor-backed provider of employee healthcare management services.
TTM Revenue: $35mm |  TTM EBITDA: $5.6mm

The Financing Situation:
The Company was seeking additional working capital for (i) seasonality around Q4 employee enrollment, (ii) cushion to continue growth and run an M&A process, and (iii) minimum liquidity to stay in compliance with bank covenants.  The Company’s senior lender is providing an asset-based revolving line of credit as well as a large enterprise value based term loan and could not extend additional credit.  Since the Company would like to pursue a liquidity event within 18 months, a non-dilutive solution was important to management as the business continues to grow and increase its enterprise value.

 The Solution:
Super G was able to work closely with the Company’s senior lender to provide a $2.0 million non-dilutive second lien term loan with a payment schedule tailored to the Company’s seasonal cash flow, growth initiatives, and bank covenants.  Super G was able to get comfortable with the seasonality of the business and total leverage given the Company’s strong financial performance, enterprise value, and experienced management team & private equity sponsor.

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Glowpoint, Inc., a managed service provider of video collaboration and network applications, announced that on July 31, 2017, the company completed a recapitalization of its existing debt obligations with support from Western Alliance Bank and Super G. The new financing eliminated $9,362,000 of debt and accrued interest obligations and reduced the Company’s outstanding common stock by 385,517 shares. As of July 31, 2017, there were no remaining obligations related to the Main Street Term Loan or SRS Note. As of July 31, 2017, there were no remaining obligations related to the Main Street Term Loan or SRS Note.

The Company expects that the Debt Recapitalization resulted in an increase of approximately $8,700,000 to stockholders’ equity on the Company’s balance sheet as of July 31, 2017. Therefore, the Company expects to meet the continued listing standards of the NYSE American Company Guide relating to stockholders’ equity (as previously described in the Company’s Form 8-K filed on June 1, 2017), subject to the Company reporting two consecutive quarters of being in compliance with such standards. The following tables summarize the impact of the Debt Recapitalization on the Company’s debt obligations and outstanding common stock as of July 31, 2017:

“Completing this critical phase of debt restructuring provides the Company a foundation to re-align capital structure and market opportunity. Having materially eliminated outstanding debt obligations by over 80%, we now look forward to focusing on product development and expanding our market-leading support platform for video collaboration through the addition of cognitive services and advanced analytics,” said Glowpoint President and CEO Peter Holst.

“We are very pleased to have completed this Debt Recapitalization, which eliminated $9.36 million of debt obligations and resulted in a significant improvement to our working capital position as of July 31, 2017. The Debt Recapitalization resulted in significant accretion to shareholder value as it is expected to increase our stockholders’ equity balance by approximately $8.7 million and reduced our outstanding common stock by approximately 386,000 shares as of July 31, 2017,” said Glowpoint CFO David Clark.

Western Alliance Bank Business Financing Agreement

On July 31, 2017, the Company and its subsidiary entered into a senior secured Business Financing Agreement with Western Alliance Bank, as lender (the “Western Alliance Bank Loan Agreement“). The Western Alliance Bank Loan Agreement provides the Company with up to a total of $1,500,000 of revolving loans. On July 31, 2017, the Company received a loan in an amount equal to $1,100,000 under the Western Alliance Bank Loan Agreement, the proceeds of which were used to fund the Main Street Payoff.  See further description of the terms of the Western Alliance Bank Loan Agreement in the Company’s Form 8-K filed on August 1, 2017.

Super G Loan Agreement

On July 31, 2017, the Company and its subsidiary entered into a Business Loan and Security Agreement with Super G Capital, LLC (“Super G”), as lender (the “Super G Loan Agreement”) and received a term loan from Super G in an amount equal to $1,100,000, the proceeds of which were used to fund the Main Street Payoff. The Super G Loan is subordinate to the Western Alliance Bank borrowings. See further description of the terms of the Super G Loan Agreement in the Company’s Form 8-K filed on August 1, 2017.

The Company:
Designs, manufactures, and supports NextGen compliant avionics systems that improve the safety, efficiency, and affordability of flying.

The Financing Situation:
The Company was seeking to refinance its existing senior credit facility and move on to a new lending relationship to better support the strategic initiatives of the Company. The existing credit facility was based on enterprise value and thus required a comprehensive debt facility (beyond a standard ABL facility) for a full take-out plus additional working capital to support growth.

The Solution:
Super G provided a comprehensive financing solution that consisted of two tranches within the $3.5 million credit facility – $1.5 million interest-only loan and a $2.0 million amortizing term loan. This structure allowed the Company to close quickly (within 3 weeks) and provided debt service flexibilty so that the Company had working cpaital cushion and could focus on business execution. Super G worked closely with the Company’s majority shareholder, Elm Creek Partners, to get comfortable with the business and management team to fund the Company quickly.

For more information on Elm Creek Partners, please contact:
Aaron R. Handler
Co-founder and Partner
aaron@elmcreekpartners.com
214-871-5655
www.elmcreekpartners.com

The Company:
Company provides lease crew services and equipment rentals to leading exploration and production companies in South and West Texas.

The Financing Situation:
The Company was seeking growth capital in addition to its existing asset based financing. The Company had equipment financing in place as well as a flexible factoring arrangement with FarWest Capital and could not unlock additional availability from its existing collateral. The Company needed to raise equity or find an airball (stretch piece) financing solution based on cash flow and enterprise value.

The Solution:
Super G was able to quickly get comfortable with the Company’s growth plans and management team to close on a multi-tranche growth capital facility that solved the Company’s immediate and future capital needs. Super G worked closely with the Company’s existing lender, FarWest Capital, to finalize an intercreditor agreement and fund the Company quickly.

For more information on FarWest, please contact:

Jason Lippman
Executive Vice President
jason@farwestcap.com
512-527-1126
www.farwestcapital.com

The Company:

Provider of nationwide parcel logistics services (transportation) and parcel shipping & management software. The Company’s services and software help customers manage an control their business, drastically improve delivery and lower transportation and postage cost.

The Financing Situation:

The Company’s software side of the business won a new large contract and needed upfront working capital to support the implementation costs associated with the contract. Factoring was not an option for the Company due to the milestone nature of the billing.

The Solution:

Super G was able to quickly get comfortable with the software business, the new contract structure, and management team to close a $750,000 loan to solve the Company’s working capital needs. Super G worked closely with the Company’s existing factor, Eagle Business Credit, to finalize an intercreditor agreement and fund the company in 2 weeks.

For more information on Eagle Business Credit, LLC, click here or contact:

Ian Varley

CEO

ivanvarley@eaglebusinesscredit.com