Tag

covenants

3 insights

A grid of 100 squares representing a $7.5 million senior facility at $75,000 each. Thirty-five squares are shaded dark to show the $2.63 million covered by a guarantee capped at 35 percent of the facility, against an unlimited guarantee that covers all 100.

Who Signs Personally, and for What

A contractor financing a $12 million acquisition can sign an unlimited guarantee, a guarantee capped at 35 percent of the facility, or none at all. The structures differ by millions of dollars of personal exposure and by about 250 basis points.
Financing StrategyBorrower Advisory
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A grid of six months by two testing conventions. Tested on current month MRR, availability falls below the $3.8 million drawn in the last three months, producing deficiencies of $120,000, $340,000 and $376,000. Tested on a trailing six-month average, headroom stays positive at $150,000, $110,000 and $40,000.

The Multiple Works in Both Directions

A software company draws $3.8 million against a facility sized at five times MRR. One bad quarter cuts MRR 21 percent, and availability recalculates to $3.42 million, putting the limit $376,000 below the balance already drawn.
Financing StrategyBorrower Advisory
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A two-point range showing that a company at $500,000 of monthly recurring revenue can access $2.0 million at a four times multiple or $4.0 million at eight times, a $2.0 million spread on identical revenue.

Most Debt Is a Fixed Number. This One Is a Multiple of MRR.

A term loan is sized once and never changes. A committed facility against recurring revenue is sized as a multiple of monthly revenue, and availability rises as that revenue rises, without a second underwriting.
Financing StrategyBorrower Advisory
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