CFOs spend months, even years, structuring the perfect financing. Negotiating terms. Navigating lender demands. They’re laser-focused on getting the best possible terms.

Then, too often, it hits them: The deal they worked so hard for is actually working against them. Raising capital isn’t just about getting a deal done—it’s about getting to the right deal. A seemingly minor misstep overlooked in the rush to close can restrict cash flow, cripple flexibility, inflate costs, or create unforeseen roadblocks precisely when the company needs capital most.

Even the most experienced finance chiefs can fall into avoidable traps, from fixating on interest rates while ignoring the fine print, to overlooking the impact of seemingly minor covenants. These are just a few of the hidden pitfalls that can derail even the smartest financial strategies. And in the current marketplace—where capital is more expensive—the margin for error is razor-thin.

Here’s a look at the biggest mistakes made when raising capital—and how to avoid them.

1) Over-Fixating on Interest Rates

THE MISTAKE

Many CFOs chase the lowest interest rate without recognizing how tight covenants and structural limitations can ultimately cost far more in missed business opportunities. Think of capital as renting money for a specific period of time—focusing solely on the “rent rate” while ignoring flexibility can be shortsighted. As your situation improves, you can always refinance at better rates; however, a missed growth opportunity is far harder to recapture.

THE DOWNSIDE

The real cost of capital isn’t just the rate—it’s the strings attached. Saving a fraction of a percentage point may mean facing covenants that limit how you use insurance proceeds (for instance, requiring immediate paydown of debt instead of allowing you to rebuild), or demanding lender approval any time you want to buy or sell equipment.

You might also find yourself restricted on capital expenditures, blocked from reinvesting in plant upgrades, or forced into time-consuming reporting requirements. All these constraints can stifle your agility in the face of new contracts or sudden market changes—ultimately costing you more than any interest-rate savings.

THE RESOLUTION

With private credit markets evolving rapidly, there are often multiple ways to access both competitive rates and more flexible terms. Success requires looking at loan agreements holistically—beyond interest rates—and negotiating for the operational freedom you need. If you can secure the capital required to solve your key business challenges and remain nimble, don’t let a slight difference in percentage points distract you from a more suitable structure.

2) Focusing Only on Financial Covenants (and Missing Other Critical Restrictions)

THE MISTAKE

Many CFOs treat loan covenants as a box to check rather than a critical risk factor—until they realize (too late) how operationally restrictive they can be. This is doubly true for manufacturers, where covenant risks go well beyond straightforward debt-to-EBITDA ratios. Provisions around equipment financing, insurance proceeds, inventory management, and asset disposal can be just as important—if not more so—than traditional financial metrics.

THE DOWNSIDE

Even a minor covenant breach can trigger outsized consequences: penalty interest rates, forced repayment demands, restricted credit access, or the need to pledge more collateral. For a manufacturer balancing capital expenditures, insurance claims (after accidents or weather events), and routine asset turnover, a lender’s right to seize proceeds or block reinvestment can be devastating. A seemingly safe leverage ratio also offers false comfort if revenue falls off temporarily or you face unforeseen costs. You can remain “profitable” on paper but still be out of compliance—potentially compromising your ability to finance growth, pay dividends, or negotiate new contracts.

THE RESOLUTION

CFOs should go beyond passive compliance and actively monitor all covenants—financial and operational—in real time. Model different what-if scenarios (e.g., a dip in sales or an unexpected capital outlay) to see how quickly you could slip out of compliance.

Before signing, negotiate operational covenants that allow enough headroom to accommodate asset purchases or reinvestment when needed, and confirm that your capex limits won’t impede modernization efforts.

Finally, engage proactively with lenders: a transparent, early conversation about your plans or potential shortfalls is far more likely to yield workable solutions and waivers than a last-minute scramble after a breach.

3) Underestimating Third-party Diligence (and Execution) Hurdles

THE MISTAKE

Many CFOs see lender-required documentation as routine paperwork, not realizing how extensive due diligence can stall deals for weeks—if not months.

Middle-market manufacturers, in particular, face extra scrutiny around collateral validation, environmental assessments, customer contract reviews, and more. What looks like a quick, two-week process can easily become a two-month ordeal, especially when you add in bank approval processes and third-party diligence like equipment appraisals or quality-of-earnings reports.

Compounding the problem is waiting too long to seek financing: if your loan matures in less than 12 months, it may be reclassified as a current liability, weakening your balance sheet just when you need the best terms.

THE DOWNSIDE

These delays don’t just eat up time; they ripple through operations and can drive up costs. Legal fees, lender upfront fees, equipment appraisals, and environmental studies can quickly total hundreds of thousands of dollars. A manufacturer budgeting a few weeks to finance a major contract may suddenly confront multiple rounds of inspections and appraisals—stretching out the timetable and risking missed growth opportunities.

Middle-market firms that haven’t assembled key diligence materials in advance often face even longer delays and higher costs, as lenders or consultants scramble to fill in the gaps.

THE RESOLUTION

Treat the documentation process as a strategic priority, not an afterthought. Being “documentation ready” means having up-to-date appraisals on machinery, clean environmental reports on older facilities, accurate inventory and receivables data, and organized financial statements.

If you’re a manufacturer, leverage asset-rich collateral (machinery, real estate, or inventory) to secure better financing terms—but remember that lenders will want clear, verifiable data.

And start planning early: deals often take months to close, and waiting until your debt is almost due forces you into rushed (and usually costlier) solutions. By anticipating hurdles, you can move faster and negotiate better, beating competitors who are still gathering paperwork.

4) Lack of a Backup Capital Plan

THE MISTAKE

“Always have a Plan B”—it’s a simple principle, yet many CFOs neglect it when it comes to capital planning. Bank of America forecasts that private credit defaults could climb as high as 4% in 2025 as 2021-vintage deals mature. This projection underscores that even a seemingly stable financing environment can shift rapidly, leaving companies vulnerable if they rely on a single source of capital.

CFOs who assume their current financing will remain available indefinitely overlook how quickly lender appetites can shift due to economic headwinds or sector-specific concerns. For instance, while banks might pull back in certain industries, private credit players may be more willing to extend debt—often at rates far cheaper than selling a minority equity stake.

However, a backup plan goes beyond merely knowing a few alternative lenders; it also means anticipating lender surprises and being prepared to provide full transparency if your business hits a snag. If negative news emerges and you haven’t earned your lender’s trust—or you lack a second or third option in your back pocket—you could find yourself scrambling for capital under less favorable terms.

THE DOWNSIDE

In today’s fast-moving environment, markets shift faster than ever. A sudden downturn, supply chain shock, or the loss of a key customer can trigger immediate capital needs and instant change in a lender’s risk appetite. Without a backup plan, CFOs face emergency funding at higher rates—or worse, no funding at all.

Meanwhile, failing to anticipate lender concerns (or trying to hide negative developments) can escalate the problem. Good lenders conduct detailed diligence; if they discover material issues on their own, trust erodes quickly, and your main credit lifeline might be cut off just when you need it most.

THE RESOLUTION

A backup capital plan isn’t a luxury—it’s a necessity. Successful CFOs diversify funding sources by maintaining multiple lending relationships and evaluating alternative financing structures (e.g., asset-based lending, equipment financing, or private credit). More importantly, they’re transparent with lenders—proactively disclosing issues before they surface in due diligence.

Addressing potential red flags early usually results in far more workable solutions and waivers than a last-minute scramble after a breach. The best time to secure backup financing is before you need it: that’s when you have negotiating leverage, time for thorough evaluation, and the ability to present your business in its best light.

By thinking ahead, you ensure your company remains agile and resilient in the face of volatility—and you can seize new opportunities while competitors are left searching for capital.

5) Failing to Tell Your Company’s Story Effectively

THE MISTAKE

Some CFOs mistakenly believe that focusing solely on strong balance sheets, interest rates, and key metrics will secure a deal—overlooking the need to share the full story behind the numbers. Remember, your financing might need to win over as many as 15 decision-makers—and if even one person can’t see a clear path to repayment or understand your company’s strategic strengths, the deal could fall apart. In fact, simply handing over financials without context leaves gaps that lenders may fill with worst-case assumptions.

THE DOWNSIDE

Without a clear, compelling story, approvals can stall or come with excessively tight terms. Lenders want to know who you are, what drives your revenue, where your risks lie, and how you plan to handle them. If you can’t provide detailed financials and analysis before receiving funding, lenders will question whether you’ll ever do so after the money is in hand—leading to tougher reporting requirements or restrictions. In the end, a hazy story can undermine trust, drive up your cost of capital, and put critical growth initiatives at risk.

THE RESOLUTION

Treat your business narrative as seriously as your interest rate:

• Outline why your company is a smart bet—covering its market position, competitive advantages, and future prospects.
• Show how you plan to use the capital, what measures are in place to protect cash flow, and when you’ll generate returns.
• Back it up with timely and accurate data—organize all statements, forecasts, and operating metrics well ahead of the financing request.

By presenting lenders with a complete, transparent view of your business, you build confidence among every decision-maker—whether you meet them directly or not. This kind of clarity makes it far more likely you’ll secure flexible, growth-oriented financing on favorable terms.

Take the Next Step

Navigating the capital-raising process is complex, and even the smallest missteps can have long-term consequences. To secure financing that truly aligns with your business strategy, you need the right partner—one that not only understands the nuances of middle-market lending, but can help you leapfrog your competition with more efficient processes and greater reach to a varied group of lenders.

That’s where CAPX comes in. As the leader in matching middle-market companies with right-fit lenders, CAPX streamlines the process, helping you access the capital you need—on the terms that work for you. Connect with us today to take the next step toward smarter, more strategic financing.

The post CFO Strategy Session: Five Capital-Raising Mistakes You Won’t Realize Until It’s Too Late appeared first on CAPX.

For CFOs considering non-bank financing options, understanding core differentiators for a firm like Caltius—from due diligence approaches to ongoing partnership expectations—has become increasingly crucial in today’s market. 

Watch the full discussion below to learn how Caltius looks at companies seeking capital, and just how important effective communication on both business resilience and strategic vision are to a company’s capital raise process.

An edited transcript is below.

Interested in learning how CAPX can help your company engage with firms like Caltius? Get in touch with us here.

Edited Transcript

Rocky Gor: Can you tell us about yourself and your firm?

Michael Kane: The firm goes back 28 years, starting with our first fund of $41 million. We’re currently investing out of our sixth fund, which is about $400 million. The last four funds have been about the same size, so we’re leveling out. My background includes education at Rice University in Houston and six years with GE Capital, which moved me from Texas to Los Angeles 35 years ago. The three of us co-founders got together almost 28 years ago with that first fund, and we’ve been doing structured finance and lower-middle-market mezzanine debt since then.

Gor: What differentiates you from other firms in this space?

Kane: Going back to our early days with that $40 million first fund, where our average deal size was about $3.5 million, none of our transactions involved private equity groups because they weren’t doing deals that small. We became proficient at conducting our own due diligence to work directly with management teams and family offices. While we now do about 20% of our deals with private equity funds and appreciate their thorough diligence process, our core strength remains in conducting our own diligence for lower-middle-market deals. We might use smaller accounting firms for efficiency, but we’ve developed comfort with this approach over the years…. We also almost never take a board seat—typically just a board observation seat, which sets us apart from others. 

Gor: Based on my GE Capital experience, the difference between working with middle-market or family-based companies versus PE firms is really how much more collaboration with management is required. It’s more of an in-the-trenches approach versus getting a prepared package (with private equity). It’s a different process, mentality, and requires different levels of patience.

Kane: Exactly, and these deals are harder to find and structure. If you wanted to be a large SBIC debt fund or structured capital fund and grow quickly, you’d focus on PE firms because of their larger check sizes. Non-sponsored deals are harder to find. We really try to partner with management. Sometimes people question our approach because we don’t have control or a control investor. Once we do a deal, we’re effectively partnered with that entrepreneur, which is something we have to carefully diligence as part of our core underwriting strategy.

Gor: What’s your current fund size and typical deal size?

Kane: Our current fund includes both an SBIC fund with government leverage and a non-SBIC fund. Some of our long-term institutional investors prefer investing without the SBIC leverage for more flexibility. Together, they total $400 million. Across our six funds over 28 years, we’ve managed about $1.8 billion, with Fund Six currently about 50% invested (plenty of dry powder). Our deal size typically ranges from $10 to $45 million per transaction.

Gor: Can you describe your ideal deal?

Kane: Looking at our history, which is available on our website, we focus heavily on business services and asset-light companies. We don’t do many big industrial deals because we prefer the cash flow dynamics and enterprise values. We’re clearly an enterprise value cash flow lender/investor, not asset-based. Most of our portfolio companies are asset-light businesses “where the assets go home at night.” We typically focus on non-change-of-control deals: growth capital, management buyouts, or one partner buying out another. We’ve had great success with deals where insiders leverage the company and roll their equity, and with employee-owned companies.

Gor: How do you address concerns from entrepreneurs and family-owned companies who might be hesitant to work with a lender they don’t have an existing relationship with? How do you handle situations where companies face challenges?

Kane: Over our 28-year history working with employees and management teams, we’ve built a strong track record. While not every deal has been perfect, we’ve managed to minimize losses. We’ve developed deep relationships—I’ve attended weddings and bar mitzvahs of our CEOs’ children. Perhaps most telling is that in our sixth fund, we have about 40 individual investors who are predominantly managers or former managers of our portfolio companies. We started this in Fund Four, offering them lower minimums than other investors. Across Funds Four, Five, and Six, we’ve had well over 100 portfolio company managers invest with us, some multiple times.

We encourage potential borrowers to review our portfolio and connect with our management teams, particularly those in related industries. We always provide references to companies that have experienced challenges because it’s easy to be a good partner when everything’s going well—but most companies will go through bumps in the road. 

For example, we currently have a company facing challenges where their senior lender wants to exit. We’ve offered a fund guarantee to provide comfort to the bank because we believe in the management team’s efforts despite headwinds in the industry (which we recognize). This is a vote of confidence for the company when it needs it, and provides a solution to all parties involved. 

Gor: How do you source these opportunities (besides getting them from CAPX)?

Kane: Our 28-year track record helps people find us when they have deals in our size range. We see the majority of deals west of the Rockies, and we now have two full-time business development people—one in LA and one in Boston. They focus on networking and bringing in team members like myself when needed. I still maintain my network, particularly in Texas where I started my career.

Gor: What’s your process when you receive a deal, and how reliable are your term sheets because of the process?

Kane: We don’t issue term sheets without substantial preliminary diligence. While this might cost us some deals due to timing, we want to speak with management and the banker first. We meet every Monday morning to review potential deals, and we don’t issue term sheets until we’ve developed a two-page “teaser” analysis outlining our core underwriting approach. This includes proposed pricing, debt versus equity structure, and allowed senior debt levels. Once the team approves, we issue the proposal. In our history, we’ve never failed to perform on a proposal where the company delivered what was represented, though we have walked away from deals during diligence when we’ve uncovered issues.

Gor: What deal type trends are you seeing in the market these days?

Kane: It’s definitely gotten harder to close deals and the process takes longer. COVID’s impact varies by company—some benefited while others were crushed—and we need to understand if these effects are temporary. Current challenges include understanding the impact of tariffs on various industries and products. For certain businesses, this creates additional complexity in underwriting, but that’s what groups like ours get paid to do: find deals, underwrite them properly, and perhaps structure them with less initial capital until uncertainties resolve.

Gor: What advice would you give to CFOs and CEOs preparing to pitch to you?

Kane: For a first call, we want to understand the use of proceeds (how much do you need and for what)—whether it’s for an acquisition, owner dividend, or management buyout. We want to hear what excites you about the business going forward and what risks you see in your business plan. With non-PE companies, we often help them develop institutional-quality reporting that would appeal to PE firms, preparing them for potential future transactions. The first call is about getting to know each other and determining if there’s a mutual fit.

Gor: In terms of introducing something like CAPX to this process: as you know, when you use CAPX, the teaser deck comes to you capturing the information you are looking for from that first call. The CFO and/or CEO inputs that information, and we work with them to create that teaser deck. 

Kane: That certainly represents our experience with CAPX, and it’s a process that makes it easier for us to decide whether a given deal is something we want to spend time on. It does help to have CAPX sifting through the information coming from the company and putting it into an easily-digestible format. 

Gor: What distinguishes you from traditional banks?

Kane: The first thing borrowers notice is that we’re more expensive than banks, but we offer greater flexibility in terms of capital amount, looser covenants, and no amortization for five years. We never require personal guarantees, which many commercial banks do even for larger companies. We work well with commercial banks—our SBIC fund has about 25 bank investors. We don’t compete for working capital lines or cash management services; we’re just taking some credit risk off their plate. When talking to CFOs who have long-term banking relationships, we position our cost against equity—helping them understand the trade-offs there.

Gor: What’s your key advice for companies starting their capital raise process?

Kane: It’s crucial to have a thorough understanding of your own business information and be honest about both positives and negatives. Many entrepreneurs understand their business well but might not grasp what’s important to outside investors or lenders. Having a good handle on both the numbers and your business’s position in the broader environment is vital. We can usually assess how comfortable we’ll be within a call or two, and having well-organized information from the start makes the process much smoother. Again, this is something where CAPX is a great asset for us: if CAPX can’t glean that information from a company, that’s a problem. 

Gor: Typically, when we find that a company is missing critical information, we go back and ask for it and help management get the right information in there to go out to lenders. 

This version of the transcript has been edited for style and clarity. 

The post CAPX Lender Q&A: Caltius Structured Capital’s Michael Kane appeared first on CAPX.

In this conversation, CAPX founder and former lender Rocky Gor joins CAPX Senior Advisor and corporate banking veteran Scott Glassberg to break down just how complex the review and approval processes can get, how rigid the steps can be, and a full tally of the number of people who may “touch” the deal.

The net-net? There are more considerations to make—and stakeholders to reach indirectly—than you may realize.

Watch the full discussion here:

Interested in discussing how to approach pitching your next financing deal? Get in touch with Rocky and Scott.

The post Beyond the Banker: Who Really Decides Your Deal? appeared first on CAPX.

Banks and private credit funds each bring distinct approaches to middle-market lending. Together, they represent a vast universe of capital solutions—each with their own qualification criteria, relationship requirements, and structural preferences.

This dual-track lending environment marks a stark departure from the straightforward bank relationships of decades past. Today’s CFO must simultaneously court multiple banks while evaluating an expanding universe of private credit options, each bringing distinct advantages and constraints to the table. The challenge isn’t just finding capital—it’s finding the right capital at the right terms without exhausting precious time and resources.

The complexity stems from structural shifts following the 2008 financial crisis. As banks adjusted to heightened regulatory scrutiny, private credit stepped in aggressively, creating today’s bifurcated market. While this expansion of options benefits borrowers, it demands sophisticated navigation of both traditional and alternative lending channels.

The lending revolution for middle-market companies paved the way for CAPX, designed to bridge this divide by streamlining connections with both banks and private credit funds. This innovation transforms a process that once took weeks into a streamlined 72-hour matching system, enabling finance leaders to spend less time searching for capital and more time deploying it strategically.

Here are five critical deal stages where automation is giving finance chiefs their time back:

1. Preliminary Underwriting & Capacity Sizing

Before engaging lenders, CFOs need precise insights into their borrowing capacity—a task traditionally mired in manual analysis. The cost is significant: Research from Gartner highlights that CFOs face increasing pressure to balance strategic leadership with operational demands, often spending significant portions of their time on tasks that could benefit from automation. Consulting giant Deloitte’s Signal Survey reports 60% of finance leaders’ hours go to operational duties rather than strategic initiatives.

Digital platforms like CAPX are changing this equation. By analyzing financials against standard lending metrics, CAPX quickly determines whether a company qualifies for a $20 million senior facility or a $50 million unitranche structure. This automation shifts CFOs’ focus from time-intensive analysis to evaluating real options, enabling faster and more strategic decisions.

2. Lender Sourcing & Vetting

With private credit’s explosive growth, the universe of potential lenders has expanded dramatically, far beyond what personal networks or traditional search methods can uncover. CAPX addresses this complexity with advanced filtering—matching borrowers to lenders based on deal size, industry focus, credit quality, and specific requirements like risk thresholds and sector specialization.

By combining vetted lender networks with data-driven algorithms, CAPX transforms what was once a weeks-long process into a streamlined workflow. It ensures CFOs can engage the right lenders efficiently while maintaining the human relationships critical to closing deals.

3. Pitching the Deal with Precision

Once borrowing capacity is established, presenting a uniform and effective credit thesis becomes the next critical step. This involves crafting a pitch that highlights the deal’s strengths and aligns with lenders’ risk tolerances, structural preferences, and sector focus. CAPX centralizes financial data and streamlines this process, ensuring consistency and clarity in borrower presentations.

By automating repetitive tasks, CAPX helps CFOs pitch with confidence and focus on strategy. This doesn’t just save time—it strengthens credibility with lenders, increasing the likelihood of securing favorable terms.

4. Eliminating Repetition with Smart Tools

Due diligence often creates bottlenecks, with repetitive questions and redundant tasks slowing progress. CAPX eliminates this friction through built-in tools like its Q&A mechanism, which centralizes and automates responses to lender queries. This ensures lenders quickly access the information they need without requiring multiple calls or duplicative conversations.

While datarooms are widely available, CAPX goes further by integrating data access with tools designed to reduce redundancy. This allows lenders to review materials, request clarifications, and make decisions faster—enabling CFOs to move deals forward without delays.

5. Term Sheets and Quick Evaluation

Once lenders are engaged, the ability to efficiently gather, compare, and evaluate term sheets becomes critical. CAPX centralizes submissions and presents term sheets in a side-by-side format, highlighting key variables like interest rates, fees, amortization schedules, and covenant requirements. This enables CFOs to quickly spot competitive offers while avoiding pitfalls like hidden fees or aggressive clauses.

A cohesive credit thesis enhances this stage by ensuring lenders fully understand the deal’s structure and value. CAPX simplifies borrower presentations, aligns lender preferences, and minimizes inconsistencies—positioning CFOs to negotiate effectively and secure the best possible terms.

The Bottom Line

While certain structures and covenants are standard across specific types of credit, the real difference lies in lenders’ varying risk appetites. These differences result in lenders offering more or less capital for the same credit profile or imposing varying levels of covenant flexibility. CAPX bridges this complexity by matching borrowers with lenders whose criteria align with their deal, ensuring CFOs can secure optimal terms efficiently.

The evolution of middle-market lending has created both opportunity and complexity. While the market offers more funding options than ever, evaluating dozens of lenders—each with unique terms and covenant structures—can consume weeks of valuable time. Automation platforms like CAPX are changing this equation, transforming labor-intensive processes into streamlined workflows. For CFOs, this shift from mechanics to strategy isn’t just about efficiency—it’s about securing the best terms in a market where every detail matters.

———–

Interested in learning more? Get in touch with the CAPX team to talk through your business capital needs, and where CAPX can help. 

The post Efficiency Unlocked: Five Digital Tools Redefining CFO Dealmaking appeared first on CAPX.

Before you start the hunt for your next loan, take a look at your approach and the ways it’s costing you time. Then, know that there’s a better way. 

1. Relying on relationships for term sheets

Does this sound familiar to you? You reach out to the banks you’ve worked with previously when you’re looking for your next loan. The banker asks you questions, prepares a pitch and a presentation. They seem enthusiastic and even confident that you’ll get the loan. As a result, you leave the meeting certain that the money is yours.

Then reality sets in. The bank’s underwriting team reviews the details and says, no way. There’s no deal. You’ve just lost time pitching a mission-critical deal to the wrong lender. 

There are faster ways to find a good lender match. With CAPX, your talks with the lender don’t start until they show you the term sheet. This removes the biggest inefficiency of the conventional lending process, giving you greater confidence that the deal will go through. 

2. Dialing for dollars

It’s not just the time that goes into building relationships with lenders that can set your company back. Using manual processes, especially in an age of automation, burns up precious time.  Without CAPX, you have no choice but to pick up the phone and reach out to banks and lenders one by one. 

CAPX has built-in tools that increase efficiency, creating credit memos and communicating your company’s needs and wants with multiple lenders. Our communication tools put you in contact with lenders and help you monitor the entire deal process.

3. Repeating the same steps

Running introductory calls, drafting written responses, and getting on more calls (all before knowing whether a term sheet is in the cards) uses a lot of your time—and gets repetitive. 

CAPX boosts efficiency (and cuts down on repetition) for you with a question-and-answer (Q&A) interface for lenders and borrowers: lenders can submit questions for borrowers to answer just once to share with all, in addition to allowing borrowers to proactively develop Q&As to preempt certain questions they are expecting. 

4. Not viewing risk the right way

Who’s in control of your company’s risk narrative? If you are not the one to manage the risk perception of your deal, your relationship lender will—which can result in a term sheet that looks quite different than what you expected (if you get a term sheet at all). 

CAPX can help you take control of your risk narrative and position your deal to lenders who are likely to bite. We work with you to develop a credit perspective that saves your time and delivers capital as efficiently as possible. 

Stop losing precious time chasing dead-end lenders. See how CAPX’s data-driven, end-to-end marketplace can help you quickly obtain the capital you need. 

The post 4 ways you’re wasting precious time chasing lenders for your deal appeared first on CAPX.

So, what’s a C-suite exec or finance professional to do? Make sure you’re tapping the whole market, not boxing yourself into just one side or the other. 

Below, we outline how to break down that capital raise—and how to secure it at better rates and more efficiently, to boot.  

1. Looking at a debt raise? Tap the non-bank private market

If traditional banks aren’t biting on your debt raise, it might be because your numbers are pristine for your stage and industry—but not for their overarching risk profile. 

Software/SaaS companies are a case in point: banks looking for the ‘right’ deal are looking for double-digit ARR growth rates, 85% gross margins, and retention rates in the upper 90%+. 

…Which isn’t realistic for most SaaS companies (VC-backed AI companies are our exception). 

Now consider this: the private lending market has grown considerably, and will continue to do so. In five years, the global private debt market is expected to reach a value of $3.5 trillion in AUM. 

So the market is certainly there. But private lenders can be hard to reach and are inundated as it is. 

How do you match your company’s niche, pitch, and capital needs to the right lender? Find a platform or service that will match your capital-raising needs with your unique profile. Sure, there are debt consultants. But why spend the money and time when there are platforms like CAPX that connect mid-market companies to private lenders directly, and help with terms and pricing, at lower rates. Think of this almost like a dating platform, but for corporate debt. 

2. Reach a broader base of traditional (bank) lenders

The more choice you have when obtaining debt capital, the better for your company. That means that going past your tried-and-true book of contacts and reaching the national market of lenders (really large banks you know and large banks you don’t know) may be ideal for your case. 

Again, utilizing a platform or service that can help you game out which type of lender, where, and who, will help you get to someone who specializes in your sector or sees opportunity in your pitch—even if they are based in another region. 

The bonus? That broader reach can ultimately lower your overall cost of capital and improve your negotiating position. 

Think of it this way: You’ll be in a better place to negotiate a deal that works for your company with multiple term sheets in hand rather than just one or two.

3. Streamline the lending process

And then there’s the logistics of it all: how efficient can you really be if you are going out and pitching lender after lender? 

Platforms like CAPX can make the process much more efficient: with a single click, you can connect to multiple lenders and receive term sheets within a few days. 

You’ll need to invest a little time up front answering questions we know you’ll get down the road (but hey—you just benefited from our deep expertise), but after that, the process is streamlined, secure, and confidential.

Tapping into the national market, connecting to private lenders and expanding your options all work together to reduce your execution risk and make it more likely that the deal will close. If one lender doesn’t work out, you’ll have others to fall back on.

CAPX increases your capital options and the probability of a successful execution. Get in touch today to learn more about how we can help your company meet its capital needs.

The post Local bank not biting? Here’s how your middle-market company can boost its odds of securing capital. appeared first on CAPX.

Key Insights

Lenders want to lend, if you have a deal that fits their ideal and tight credit box
You might have to wait to get feedback, even negative feedback
Multi-level marketing
Yes, it can take 2 months to close easily
The upshot
How can CAPX help?

Lenders want to lend, if you have a perfect deal that fits their ideal and tight credit box

There is no negotiating with the credit teams anymore, their decisions are binary and they are sticking with them. Lenders at every step of the credit spectrum want to do deals that fit their ideal risk/return profile. Which means, most credit guys turn down deals that they perceive to be outside the tightened credit box, never mind the potential higher returns. This applies to banks AND a majority of non-bank lenders. What happens when the lender you approach finds a little blemish on your credit story?

You might have to wait to get feedback, even negative feedback

A lender we spoke with confessed that a lot of their time was spent dealing with portfolio deals gone sideways. Plus, with credit police ready to say no to anything they show, a hint of imperfection earns a new deal “bottom of the pile” status, instantly. 18 months ago, deals launched on CAPX used to get multiple term sheets between days 3-5 after launch. Now we are getting one at the end of 5 days. Lenders are super focused on executing their ideal deals, lest the credit box tighten again – bird in hand, etc.

Can you get better terms, higher liquidity and lower interest rates for your company?

We can help you think through your options. Click here.

Multi-level marketing

Not the AmWay kind, we are referring to marketing to multiple lenders in multiple risk / return layers, simultaneously. You want to do this to quickly find lenders that can do the deal, and to have a back up plan, just in case the chosen one doesn’t close. We have never experienced predictability to close so low, ever. Even if a lender issues a term sheet, a lot can happen before the wire hits your bank account – their fund may run out of capital (or couldn’t get to that first close on the new fund), credit doesn’t like something they saw, another portfolio deal in a similar industry defaulted or the underwriter wanted to protest the end of remote work – we have seen all of these scenarios in last 18 months (except for the one about remote work, but we suspect that happened too!).

Yes, it can take 2 months to close, easily!

When our founder worked on the bankruptcy financing deal for Delta Airlines, it went from TS to commitment and fully negotiated credit docs in under a week, and they were on the hook for the full amount! Not sure even such high profile and lucrative deals can move so swiftly in today’s market. So, build buffers in your process – buffers to get to multiple lenders, get response from them and to close the deal. And, most importantly, buffers in case a lender backs out of deal at the last minute due to changes from their credit committee. You may wonder, is it really this bad?

What type of lenders are right for you?

Get a market read from our CEO, Rocky Gor. Click here.

The upshot

No, it is not dire. If you can simultaneously get to multiple lenders and find the ones that like the risk / return mix for your deal, you will most likely get the cheapest rate offered in the last 3 years. Yes, lenders are hungry to book deals that fit their tight credit box. The trick is to find that lender, without having to spend months talking to half the market.

Have you thought through your pitch for lenders?

We can help you prepare for an efficient outcome. Click here.

How can CAPX help?

CAPX is a secure, web-based corporate finance marketplace that matches middle market companies seeking more than $5MM with relevant lenders nationwide, and uses advanced algorithms to streamline workflows and accelerate deal execution. With CAPX, middle market borrowers can:

• Review and compare multiple credible structures to obtain the capital you need without having to consult an expert
• Access debt capacity under any capital structure scenario and identify the number of lenders available to provide capital, irrespective of credit quality
• Find matching lenders – both banks and alternative lenders – from across the country without networking or meetings
• Use our online tools to craft a compelling, lender-ready credit pitch once and instantly distribute to multiple lenders of your choice
• Obtain competitive rates and terms in days without repetitive calls and meetings

CAPX is designed to be a self-serve platform with no direct cost to borrowers, since  CAPX is compensated by lenders when deals close. Optional CAPX Assist services are available for a fee to help borrowers structure and launch deals, obtain term sheets, as well as negotiate and close deals with lenders, if desired.

The post Behind the Curtain in Today’s Debt Markets appeared first on CAPX.

While the institutional debt market is relevant for larger middle market firms with transactions typically greater than $150MM, can this be a leading indicator of what is to come in the lower middle market? 

We think so.

The economic environment is less uncertain and a lot of lenders have not put much capital to work in the last 18 months. As a result, they are motivated to protect their existing loan portfolio and also book more loans by agreeing to accept a lower interest rate and/or more borrower friendly terms.

From what we see in the middle market everyday, we believe that the refinancing cycle has started in the conventional middle market segment as well. 

This research note is designed to inform our readers about the current market conditions and how to position themselves to take advantage of the current window of refinancing opportunities to lower their interest burden.

Key Insights

Why refinance now?
When you should consider refinancing?
What to expect in the current debt markets?
What challenges to expect while refinancing?
How to prepare before approaching lenders?
How can CAPX help?

Why refinance now?

Refinance now because it’s possible to get debt at lower rates again. 

In fact, interest rate margins have declined to early 2022 levels or below.

Most lenders are hungry for deals due to the slowdown in M&A activity. So, you may have a choice of lenders. And, even if you cannot find a bank to refinance your debt, there are hundreds of credit funds ready to deploy capital.

When should you consider refinancing?

Consider refinancing if you have:

1. Expensive Debt – your current debt costs 10% or more.
2. Upcoming maturity – your debt matures within 18 months.
3. Constrained liquidity – your current lender cannot your liquidity needs.
4. Tight covenants – your existing loan covenant structure is too restrictive and inflexible.

Can you get better terms, higher liquidity and lower interest rates for your company?

We can help you think through your options. Click here.

What to expect in the current debt markets?

Although it is still unclear when or how much rates will go down, here are three things you can definitely expect to see when refinancing in the current debt markets.

First, it’s a bifurcated market. If you have a highly creditworthy deal, many lenders are available and will compete for it. But if your deal has unique attributes, there will be fewer lending options and it will require broader access.

Second, it’s a slow lending market. Right now, lenders are selective and slower to respond. So, it takes much longer to get a deal done now compared to 18 months ago.

Third, banks still have the cheapest capital, but increasingly, they are not the only game in town. It might make sense to pursue banks for lower rates if you have meaningful cash on the balance sheet and steller credit quality. Alternatively, for a few percent more in rates, you can get a choice of non-bank lenders willing to offer more liquidity and more capital with more accommodative covenant structures.

What refi challenges can you expect?

Companies often turn to CAPX after facing the following three challenges:

1. Wrong Deal Structure – capital can be obtained under multiple structures. Lack of full understanding of available options and lenders that can accept a certain structure always leads to wasted efforts, expensive capital and ultimately, frustration.
2. Limited Network – everyone knows some lenders, but do you know the right lenders? Heavy reliance on only existing relationships often provide a false sense of security and almost always lead to less than optimal capital solution.
3. Loss of Time – Pursuing less than optimal structure with wrong lenders wastes a lot of time – often months. At some point, borrowers end up accepting less than optimal solutions because that’s the only option they have and they are running out of time.

What type of debt structures and lenders are right for you?

Get a market read from our CEO, Rocky Gor. Click here.

How to prepare before approaching lenders?

First, determine your specific needs and based on that identify lenders you should approach. When you approach lenders, identify specific goals of your refinancing process.

Second, prepare your basic financials. Gather audited or reviewed financials for the last three years, most recent TTM financials and financial projections for the next three years.

Third, prepare your pitch. In this narrative, explain why a lender should give you capital and why your business will be able to repay them. You will need a cohesive and compelling pitch that you can make to all lenders you approach to avoid individual repetition.

Have you thought through your pitch for lenders?

We can help you prepare for an efficient outcome. Click here.

How can CAPX help?

CAPX is a secure, web-based corporate finance marketplace that matches middle market companies seeking more than $5MM with relevant lenders nationwide, and uses advanced algorithms to streamline workflows and accelerate deal execution.

With CAPX, middle market borrowers can:

• Review and compare multiple credible structures to obtain the capital you need without having to consult an expert
• Access debt capacity under any capital structure scenario and identify the number of lenders available to provide capital, irrespective of credit quality
• Find matching lenders – both banks and alternative lenders – from across the country without networking or meetings
• Use our online tools to craft a compelling, lender-ready credit pitch once and instantly distribute to multiple lenders of your choice
• Obtain competitive rates and terms in days without repetitive calls and meetings

CAPX is designed to be a self-serve platform with no direct cost to borrowers, since  CAPX is compensated by lenders when deals close.

Optional CAPX Assist services are available for a fee to help borrowers structure and launch deals, obtain term sheets, as well as negotiate and close deals with lenders, if desired.

The post Middle Market Refinancing: The Complete Guide appeared first on CAPX.

Credit markets are tight, but refinancing is absolutely possible in today’s markets. Borrowers should consider the following realities while considering refinancing:

• Lenders are slow to respond, more selective and largely unpredictable. This environment is created by the combination of increasing cost of capital for lenders, higher demand for their product compared to the capital they want to deploy and a general unease about the macroeconomic picture.
• Banks still provide the cheapest capital, but they want a much higher credit quality – aka, lower leverage, higher fixed charge coverage, long track record of positive cash flows and ideally, support from a sponsor with deep-pockets.
• Cash is king, especially if you want a loan from regional banks. Following the Silicon Valley Bank failure induced capital flight, regional banks are largely focused on finding clients that can bring a meaningful amount of cash to the depository accounts. A borrower with cash deposits not only gives credit comfort, it helps banks prop up depleted capital reserves without having to purchase CDs in the expensive wholesale market.
• Direct lenders (or non-bank lenders) are active, as long as you are willing to pay low teens in interest, and higher.
• In general, the process would take much longer and require a well diversified outreach to multiple lenders to achieve the results you are aiming for.

2. When should middle-market (MM) borrowers consider refinancing their loan?

Three scenarios typically prompt a borrower to seek refinancing:

• High interest expense – 30-day SOFR, which is the index used by most bank loans, was under 0.15% before April 2022 – today it is 5.3%. In other words, a loan priced at 3% in April 2022 requires 8% interest today. More importantly, a loan priced at 7% in April 2022 would require over 12% in interest today. 12%+ debt is a good reason to find a cheaper alternative, any day!
• Covenant compliance – Extending the logic above, it can be difficult to comply with fixed charge coverage covenant when interest increases by 5% in 18 months but operating income or margins do not. Lenders will either demand even higher interest to compensate for covenant failure or force borrowers to refinance (some lenders would rather have their capital on their balance sheet vs. borrower’s).
• Constrained liquidity – Some lenders might not be able or willing to modify terms and structure of a loan to provide additional capital even when the loan structure is unnecessarily restrictive for a healthy borrower. In such cases, refinancing becomes the only solution.
• Upcoming maturity – term debt, typically classified as long term liability, is classified as current liability if the maturity is within twelve months. For most CFOs, the twelve months before scheduled maturity is a good marker to refinance or extend the maturity. In today’s slow-credit environment, borrowers should start the refinancing process 16-18 months prior to scheduled maturity.

3. How should a borrower prepare for refinancing and how long does it take to refinance?

The first step is to exhaust all possibilities for obtaining a better deal with your existing lender. By offering additional collateral, changing the structure from cash flow to asset backed or by agreeing to additional covenants or monitoring if you can improve your current loan facility, that would save a lot of time and effort. If you cannot get what you need from the current lender, you should think through the following timeline and steps.

Once a borrower and lender agree on a term sheet, it typically takes 45-60 days to close a debt deal. The key issue is how long it would take a borrower to find the right lender and acceptable term sheets.

On CAPX, we start getting term sheets within day 3-5 of launching the deal due to our targeted digital approach to connect borrowers with multiple lenders offering multiple structures simultaneously. However, if a borrower is following a conventional path of ‘dialing for dollars’, we recommend allocating 3 months or more to find a lender.

In either case, before you approach lenders for refinancing, have the following ready:

• Most recent trailing twelve months financials, ideally in a monthly template (income statement, balance sheet and statement of cash flows)
• Audited or reviewed financials for last three fiscal years and projected financials for the current fiscal year and three years in future, ideally in a monthly or quarterly format
• Background of the company and business in a presentation or a write up
• A well thought out credit structure and sources and uses that reflect the transaction

On CAPX, our platform takes users through steps to collect all the relevant information needed for refinancing. Our algorithms not only process the raw financial data entered by you to identify the right credit structures and appropriate lenders to you, it also creates a uniform and cohesive credit story in a format that saves lenders hours of busy work, making decision making much faster.

If you don’t have time or resources to go through the CAPX process, you can assign it to us through our CAPX Assist service – we will have your deal launched to the right lenders within 24 hours.

4. What challenges do MM borrowers typically face when it comes to refinancing?

The primary challenge is often regarding the right debt structure to pursue. At times, there could be multiple debt structures that can be applicable. A structure that is inappropriate for the current credit quality and long term strategic needs of a borrower can set them on a path of repeated calls with many irrelevant lenders over many months, which often result in either (a) aborted refinancing process, or worse (b) an inefficient and much more expensive structure that can limit future strategic options.

The second challenge is network specific. Even if a borrower identifies the debt structure they want to pursue, finding the right lenders who would extend needed capital under the identified structure remains a time consuming endeavor. This is true even for PE firms who typically know many lenders.

The third challenge is borne out of the combination of the two described above – time! In a recent survey conducted by CAPX, almost 60% of middle-market executives and PE professionals indicated that it is too time consuming to obtain debt. As a result, most borrowers finally give up and accept less than ideal debt deal with less than cutting edge economics, just to be done with the process.

A uniform credit story, a comprehensive credit package targeted to the right lenders for the right structure and the power of digital distribution avoid all of these issues for prospective borrowers on CAPX.

5. How would lenders assess a refinancing opportunity and how can CAPX help borrowers check their eligibility before seeking a new loan?

Lenders make credit decisions based on sustainability of the value of collateral that is backing the loans. While there are multiple ways of approaching this credit analysis, but we do not expect you to become credit underwriters. On CAPX, we ask you to give us the information you know better than anyone else, i.e. your company’s financials and your capital needs, and our algorithms do the rest – in seconds.

CAPX uses its algorithm-based match engine to assess the risk of your credit and match your deal with the lenders that might be willing to take such risk by extending credit. If we show you matching lenders, you are eligible!

6. Is there anything in particular that middle market borrowers need to know before refinancing?

Borrowers should be aware of the pros and cons of different types of loan structures, such as asset-backed loans (ABL) or leveraged loans, and understand how the choice of lender and loan structure can impact their business. Refer to CAPX Insights for an in-depth review of all different types of loan structures available to middle-market borrowers on CAPX.

Borrowers also need to have a good idea of how to tell their credit story uniformly to all lenders they approach and they need to know what they can offer to lenders to make the credit risk manageable. This could be the value of current and/or fixed assets, long history of stable cash flows, diversified customer base, leading market share, unique IP, recurring revenues for a SaaS business model, etc.

7. What are the biggest mistakes that MM borrowers typically make when refinancing and how can CAPX help them avoid those mistakes?

Increasingly, the most common mistake is not diversifying the lender base and relying on a handful of lender relationships. All lending institutions are unpredictable due to their internal challenges, so the only way to guarantee an optimal outcome is to approach a variety of lenders.

Other common mistakes include not exploring all available capital options, not negotiating with existing lenders to restructure deals, and often turning to equity financing without fully analyzing the relative cost of equity compared to debt.

Some of these mistakes can be expensive in the short to medium term, e.g. unusually high interest rate, restrictive debt structure and high prepayment penalties. Worse yet, some of these mistakes can be very difficult to rectify, e.g. equity investment from a party with misaligned interests.

8. What are the most important tips to keep in mind while negotiating for refinancing?

Negotiations should focus on more than just the interest rate. Consider the following:

• Liquidity to manage through economic uncertainties should be on the top of the list of priorities. Under an asset backed structure, liquidity would be driven by collateral eligibility criteria and advance rates. For leveraged or cash flow structures, it will be driven by leverage ratios. Negotiate for no more than an annual appraisal of asset values and monthly borrowing base for asset backed structures. For better flexibility, negotiate for lower reporting requirement as your financial performance improves. For financial covenants, ask for 25%-30% cushion over projections.
• Flexibility to take advantage of strategic opportunities created by the economic uncertainties should follow closely. If potential acquisitions or opportunistic expansion of existing operations is possible, negotiate to obtain delayed draw term loan (DDTL). The cost of having additional debt capital available to quickly execute on strategic opportunities is a meager premium for that real option.
• For interest rates, insist on a pricing grid. Surely, the economy is going to improve some day and so will your financial performance. Build in the ability to automatically reduce your interest costs by negotiating a pricing grid.

9. What types of corporate loans can be refinanced?

In general, all secured bank loans can be refinanced. Some loans provided by non-bank lenders would have a no-call period of a year and then some prepayment period. If you are within the no call period, time your refinancing to match the end of the no call period. Hopefully, the cost of prepayment premium would be covered through a cheaper replacement loan.

For bonds, convertible as well as long term, prepayment periods can be much longer – 3 years+. Convertible debt, if out of money and within the callable period, can be refinanced with conventional bank debt to avoid equity dilution in future.

10. What are the pros and cons of refinancing and what are the key factors that determine whether it’s a wise choice to refinance a loan at this time?

Let’s be honest, getting a new corporate loan is a process. Unless you are really fatigued by your current lender or have unusually high interest expense, the process of refinancing itself is a big negative.

On the positive side, higher liquidity, additional capital, lower interest rates and reprieve from aggressive covenant structure could more than make up for the efforts required to refinance.

11. What should MM borrowers look for when selecting a MM lender?

In order to have a selection of lenders to choose from, in today’s market, borrowers have to go well beyond their immediate relationships and locations. Nationwide campaigns are a must.

Seek lenders that are responsive and creative problem solvers. It is worth paying 25 or 50 bps more for a lender that is not dogmatic vs. the one that works just with a formulaic approach.

The post All Your Refinancing Questions Answered appeared first on CAPX.

Quick Breakdown

Capital Type: First Lien Term Loan, Term Loan A (when provided by banks), or Term Loan B (when provided by non-bank institutions such as CLOs)
Typical Use: Finance growth, mergers and acquisitions and dividends
Funding Mechanism: Typically, fully funded at the close of the transaction. Delayed draw features may be available under certain circumstances
Security: Senior secured first priority lien
Collateral: Typically, all assets of the company and pledge of equity. In certain circumstances, personal guarantee from the owner of the business may be required
Payment Priority: Usually the first to be repaid from the proceeds of liquidation of its collateral. When paired with another debt facility with a first lien on the same collateral, will be repaid in equal proportion, or ratably, with other first lien debt

Who Should Consider a First Lien Term Loan?

First lien term loans should be considered by borrowers with the following attributes: 

1. For cash flow or EV structures, businesses with EBITDA greater than $7MM – $10MM, and ideally above $15MM
2. For most banks, the difference between the term loan amount and the value of the assets, known as the ‘airball’, typically needs to be less than 20% of the loan amount. Banks make an exception to this rule for highly profitable borrowers backed by private equity firms with a great track record.
3. Stable, largely predictive cash flows and a demonstrable track record of consistent financial performance.
4. Senior debt to EBITDA ratio less than 3.0x, and total debt to EBITDA ratio less than 4.0x, if the term loan is to be provided by banks. Depending on the ownership, transaction type and enterprise value, direct lenders can fund term loans upwards of 6.0x total debt to EBITDA ratio. 
5. For borrowers with a meaningful amount of fixed assets, first lien term loans can also be structured based on appraised value of the underlying collateral. This structure would function quite similarly to an ABL.

Advantages of a First Lien Term Loan

Borrowers of first lien term loans enjoy the following benefits: 

• Relatively low cost–when provided by a bank, first lien term loans are among  the most economical debt financing options
• Low maintenance–reporting obligations limited to financials and covenant compliance certificates
• Competitive market–one of the most common debt products offered by bank and non-bank entities alike, leading to a better choice and efficient pricing for capital seekers. When credit quality is not suitable for banks, credit funds can provide this capital at a higher cost and with almost no amortization requirements 
• Simpler lender group –typically, the same lenders that provide a cash flow line of credit also provide a first lien term loan, resulting in fewer documentation requirements

Drawbacks of a First Lien Term Loan   

There are prominent considerations that borrowers of a first lien term loan should take into account:

• Banks expect additional business such as cash management, in return for providing this relatively cheap form of capital
• Relationship focused–regular and somewhat frequent contact from bank relationship managers is required
• Mandatory amortization is required by banks, creating meaningful cash outflow (reducing what can be spent for other corporate purposes)
• If provided by non-bank institutions, cost of capital will be relatively high
• Periodic appraisal of collateral may be required for asset-backed structures

Underwriting Process for a First Lien Term Loan

Capital Providers: Banks, certain non-bank credit funds and Business Development Companies (“BDCs”)

Underwriting Thesis:  

1. Recovery through ongoing cash flow generation of Capital Seeker or through refinancing. In distressed situations, recovery through sale of Capital seeker as an ongoing business.
2. For asset-backed structures, recovery through liquidation of collateral in a distressed situation.
3. For recurring revenues based structure, recovery through collection of ongoing contractual payments

Underwriting Focus:  

1. Confirmation of business’ ability to generate cash flow and repay debt, ability of owner or sponsor to inject additional equity and liquidity.
2. For asset backed structures, liquidity and value of the collateral.
3. For businesses with recurring revenues, e.g. software companies, validation of the company’s ability to generate recurring revenues and maintain healthy contract renewal rates.

Underwriting Process:

1. Typical credit underwriting process focuses on the ability of the business to generate consistent cash flow and risks that may disrupt consistent cash flow generation. Underwriting involves analysis of business model, competitive dynamics, customer base and commercial terms, ownership history, historical financial performance as well as financial projections, operations and background of key stakeholders, including key executives.
2. Quality of earnings report produced by an accounting firm to validate the EBITDA of the business as well as any adjustments and an industry study to validate the company’s competitive position, size of the market, customer feedback, etc.
3. Some banks may want to conduct a collateral exam to review and analyze accounts receivable performance, inventory records and record keeping systems.
4. Analysis of owner’s personal financial condition may be required when personal guaranty from the principal owner(s) of certain smaller businesses is supporting the credit
5. For asset backed loans, appraisal of collateral by a certified appraiser to establish Net Orderly Liquidation Value (“NOLV”), which will govern the amount of capital that can be borrowed against such assets.

Amortization: Banks typically require mandatory repayment of 2% – 10% of the original loan amount on an annual basis. Non-bank institutions typically require a very small amount of amortization or none at all.

Financial Covenants:  

1. Most commonly, leverage ratios (senior debt to EBITDA and total debt to EBITDA) and fixed charge coverage ratio. Less frequently, minimum net worth requirement, maximum capital expenditures and interest coverage.
2. Covenants related to appraised value of the collateral for asset backed structures.
3. Total debt to recurring revenues ratio for structures focused on recurring revenues.  

Ongoing Reporting:   

1. Company prepared unaudited monthly financials, audited annual financials, annual financial projections
2. Periodic appraisals of collateral for asset backed structures  

If you’re interested in obtaining a first lien term loan, and you would like to discover the benefits of expanding your lender outreach to ensure the lowest cost of capital, please click the button below to speak with one of our debt experts.

The post First Lien Term Loan: A Closer Look appeared first on CAPX.