Most Debt Is a Fixed Number. This One Is a Multiple of MRR.
Almost every facility a company will ever sign is a number agreed once. Recurring revenue supports a different shape, and most founders have never been shown it.
Take an illustrative case. A B2B software company runs $500,000 of monthly recurring revenue, so $6.0 million of ARR. It needs capital to fund a sales expansion that will play out over the next two years.
A term loan answers that with a number. Say $3 million, drawn at close, amortising from month one. If the company doubles in eighteen months the loan does not notice, and getting more means starting a second process.
A committed facility against recurring revenue answers it differently. It is not sized in dollars at all. It is sized as a multiple of monthly recurring revenue, and specialist recurring-revenue lenders typically set that multiple somewhere between four and eight times MRR.
Two identical companies, a $2 million difference
At $500,000 of MRR, four times is a $2.0 million facility and eight times is $4.0 million. Same revenue, same month, double the capital.
Where a company lands inside that range is not a negotiation, and it is not about how well the pitch goes. It is set by the quality of the revenue underneath it: gross revenue retention, growth rate, gross margin, net burn, how concentrated the customer base is, and how much of the book sits under contract rather than month to month.
Those six inputs are also, usefully, things a company can work on. A business that knows the multiple is what it is negotiating stops arguing about rate and starts fixing retention.
The part with no equivalent in a term loan
Availability is intended to grow as MRR grows.
That sentence does most of the work. Take the same company at six times, so $3 million available against $500,000 of MRR. Eighteen months later MRR has reached $750,000. The facility is now $4.5 million.
Nobody re-underwrote the company. There was no second diligence process, no new term sheet, no fresh negotiation. $1.5 million of additional capacity appeared because the revenue did.
The term loan next to it is still $3 million, and by month eighteen it has been amortising for a year and a half, so the balance available to the business is smaller than the day it closed. Two facilities, opposite trajectories, same business.
The draw window typically runs two years, and there is no requirement to draw again after the initial draw. A company can take the first tranche, grow, and simply leave the rest sitting there.
The covenants are not the ones you have seen
This is where borrowers with prior debt experience get caught, because the tests are not the familiar ones.
A facility of this kind usually carries two covenants: one on gross revenue retention and one on burn or EBIT loss. Balance sheet and liquidity covenants are generally not required at all.
No leverage ratio. No fixed charge coverage. No minimum cash test.
Which changes what a bad quarter means. A company can miss its growth plan substantially and remain entirely compliant, because growth is not tested. The same company can trip on a churn month that looked minor in the board pack, because retention is. Founders who have borrowed before tend to watch the wrong two numbers for the first year.
The mechanics, briefly
Underwriting to close usually runs five to eight weeks, so it is not a facility to start when the cash is needed in three. Once it is in place, draw requests typically fund within 24 to 48 hours, which is what makes the undrawn portion genuinely useful rather than theoretical. The facility is senior secured against company assets.
How Thalos Capital Approaches This
Thalos Capital structures Recurring Revenue Debt around contracted recurring revenue rather than hard assets, borrower-side, in the United States. An Amortized Term Facility runs three to six years for companies between $2 million and $20 million in ARR, with principal that ladders up as revenue grows. An Interest-Only Facility runs two to three years at $5 million or more in ARR, with interest-only payments and a balloon at term end. Both require a recurring-revenue technology business with at least ten clients and gross margin above 50 percent. Neither carries dilution, board seats, or warrants.
The work is matching shape to situation. A company funding a defined project with a known cost is often better served by a term structure. A company funding a two-year expansion whose cost depends on how well it goes is usually better served by capacity that moves with the revenue, and the difference between those two answers is worth more than the difference between two interest rates.
What both have in common is that the multiple, the covenants and the growth mechanism are all set by the quality of the recurring revenue. Which means the work that improves the financing is the same work that improves the company, and it is done before the process opens rather than argued during it.
Most financing situations have more options than the borrower initially sees. A conversation is enough to map them. Submit your financing request at https://thaloscapital.com/contact.