Greymatter.io

SG Credit Partners Provides $3MM ARR Borrowing Base Growth Capital Facility

The Company

Founder-owned AI software subscription and services company providing a management platform for microservice-based enterprise applications.  Services Revenue: $10MM | SaaS Revenue: $3MM.

The Financing Situation

The Company had successfully grown their annual recurring revenue (ARR) base from $2MM to $3MM over the course of 12 months with no outside investment. In order to raise an equity round at a high valuation, they knew they needed to drive ARR up to $5MM in 2020. This would require investment in software development and hiring additional sales personnel, but the Company was under a cash constraint due to the cyclical nature of their contracts. The majority of the Company’s contracts are tied to government agencies and therefore tied directly to the annual government budget and spending cycle. The Company needed near term liquidity to fund R&D and sales initiatives in order to achieve their revenue growth goals in 2020.

The Solution

SG was impressed with the Company’s software platform, organic growth, strong pipeline of contracted revenue, and ability to reach positive cash flow with no equity financing and minimal debt financing. SG provided a senior secured, $3MM growth capital loan structured around an ARR borrowing base and provided tailored amortization around the Company’s cyclical cash flow.