Creative Funding for Companies in the Lower Middle Market and Small Cap Area
I recently sat down with Charles Yacoobian on Blog Talk Radio to talk about the ins and outs of lending for small and middle market companies. During our time on the B2B CFO Podcast: Asset Based Lending.. Is it right for your business?, we also discussed how at USCP, our philosophy is to provide businesses with a unique service that matches borrowers' needs to appropriately priced capital.
We are able to assess complex or special situations quickly and provide solutions outside the bankable box. Read a short excerpt from the interview below, and learn how our creative approach to funding has made us one of the most innovative small- to middle-market investment banks in the country.
You can also visit our blog to find out Why Commercial Banks May Not Be the Best Source of Capital for Your Business.
Charles: …Can you tell us a little about your background and about US Capital, and what you and your company do?
Jeff: Sure, Charles I, for years, ran a middle market aerospace company, and we were heavy users of asset based lending and capital of all kinds, for machinery, equipment, revolving credit lines, buildings, you name it. And well, I sold that business, in the early 90s, and with some of the proceeds, capitalized US Capital Partners with the intention to provide that kind of capital, that I was a big user of, to other businesses of that size.
C: Okay, and your company specializes in asset based lending for small and middle market, private and public companies, is that correct?
J: Well asset based lending yes. It’s small cap, you know, maybe 5 million dollar top line sales, up to about 100 million, 120 million is our sweet spot, and that’s primarily because as companies scale beyond 100 million or 150 million in sales, there’s quite a robust community of lenders that are interested in those kinds of transactions. On the other hand, in the lower middle market or “small cap” area, there are much fewer lenders are down in the space, so we like to be here because we provide kind of a middle market professional service down in the small cap area which is usually served by kind of a variety of services from relatively unsophisticated to what we like to think is best practice, and we try to lead best practice in the space. So, that’s why we’re here.
We will lend a variety of asset classes, or, and this really answers your question now, or, we may bring in another lender that specializes in an asset class and work with him and loan right next to him. So being a lead arranger, if our cost to capital availability on a particular piece of this financing isn’t optimal, well our structure is, we’ll bring in the optimal player. Let’s say a commercial bank, a very inexpensive commercial bank, is willing to do an AR line for your business, but they won’t touch your inventory or your cash-flow loan. Well, we will work with that bank, we’ll bring them in for the inexpensive AR portion of it, and then we’ll provide the little more expensive inventory and cash-flow loan so that you end up with a blended rate that’s very palatable.
C: Right.
J: Instead of force feeding you the entire debt structure from us, you see?
C: Right.
Listen to the full interview here: B2B CFO Podcast: Asset Based Lending.. Is it right for your business?