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Looking for later-stage ($10-$50MM revenue) Debt

I'm currently searching for potential partners to lend $2-5MM in subordinate debt. My company: Tech company in San Francisco doing $20-$40MM in revenue, scaling operations quickly. We have a line of credit backed by accounts receivables, and would like to add some junior debt as security. What firms/funds have you worked with/who would you recommend? Really appreciate the input.

Answers

Topic Expert
Keith Perry
Title: Director of Global Accounting
Company: Agrinos, Inc.
(Director of Global Accounting, Agrinos, Inc.) |

Western Technology could be an option; usually it is in conjunction with an investment round, but not always. If you send me a prospectus I can make an introduction.

Topic Expert
Mike Rose
Title: Managing Director
Company: Montage Capital
LinkedIn Profile
(Managing Director, Montage Capital) |

There are a couple of firms you can talk to regarding this financing need. The key is identifying a partner that can work effectively with the bank you have in place, as an inter-creditor will be necessary, and the sub lender will be subject to lockup periods, etc. that will make a "friendly" relationship amongst the lenders important. In addition to financial metrics, another factor that will determine how many firms are interested is whether or not your company is venture-backed. Most funds/firms specialize in following the VCs -- essentially layering capital behind equity. Finally, given how difficult it is in most tech sectors to forecast accurately, it's important to have a proven partner that will be a stable, reliable partner/provider of credit. Many firms/funds/banks come and go in the tech lending market, so selecting a lender that will be there "in good times and bad" is crucial given their junior lending position.

Welles Hatch
Title: Senior Managing Director
Company: Adrian Loring Advisors LLC
LinkedIn Profile
(Senior Managing Director, Adrian Loring Advisors LLC) |

Assuming EBITDA positive operations, you may want to evaluate Arctaris Capital as a source of non-dilutive capital. Andy Clapp is principal and as smart as the they come. Arctaris is offering royalty based financing based on TIGRcub instrument. background here: http://www.arctaris.com/images/stories/arctaris_royalty_security_white_paper.pdf

Anonymous
(Finance) |

Thanks guys - really appreciate the input

Sierra Hinson
Title: VP, Operations
Company: Pear
LinkedIn Profile
(VP, Operations, Pear) |

There are a lot of great players out there.

You could look into Western Technology (I've had a great relationship with them for the past few years). They are a venture debt provider and the cost will be fairly high compared to a traditional bank however it should come with more flexibility.

On the traditional bank side, I would recommend Square 1 or SVB.

Best of luck!

Gary Honig
Title: President
Company: Creative Capital Associates Factoring Co..
LinkedIn Profile
(President, Creative Capital Associates Factoring Company) |

The operative issue is "secured" vs "non-secured" lending. The existing conventional lender will have filed a UCC-1 against all business assets. There is undoubtedly a loan agreement that prohibits using those business assets as collateral for another loan, meaning failure to notify the bank could result in immediate default of the loan (a potential not to be avoided.)

So any new source of capital will know that in case of liquidation their capital will be second behind the senior lender. This is not to say it cannot be done, but it will be typically done using a mezzanine debt facility that normally operates in follow on capitalization situations. These folks are best found around Wall Street not Main Street.

The requirement is relatively small given their appetite and that may be a challenge.

Robert Honeyman
Title: CFO
Company: Advanced Predictive Analytics
(CFO, Advanced Predictive Analytics) |

1. If you haven't yet, ask your banker if they have any groups that they've worked with in the past.

2. Check out Partners for Growth. You've described their sweet spot. http://www.pfgrowth.com/. Andrew Kahn is the managing director.

Topic Expert
Edward Abbati
Title: Vice President of Finance
Company: Location Labs
LinkedIn Profile
(Vice President of Finance, Location Labs) |

I did a venture debt deal with Hercules Capital. We are around the same size. I am very happy with them and they have been extremely flexible in meeting our business needs. I would be very happy to make an introduction, just email me.

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