Cash flow lenders have become harder to find in recent years, but for credit-worthy borrowers with stable cash flow from operations, there is still money to be had.
Today I had lunch with Suzanne Dwyer from Massachusetts Capital Resource Company. MCRC offers cash flow loans up to $5 million in the form of mezzanine and long term debt. Suzanne’s group lends to Massachusetts-based manufacturing, distribution, service and technology companies. Most of their borrowers are profitable businesses with revenues of $3 million to $100 million, and have an existing relationship with a senior lender. Their debt transactions typically mature in seven years and feature fixed rates of interest, with interest payable currently and amortization schedules based on the company’s cash flow forecast.
One common situation where MCRC can help would be a borrower with a revolving credit facility that needs capital to expand its operations into a new market. The borrower’s existing bank line would allow them to finance a portion of the working capital (additional inventory and receivables), but the company needs additional capital for an office build-out, additional staff, etc. MCRC would be able to support the borrower with term loan that would be subordinated to the existing bank. Because MCRC is a cash flow lender, their primary concern is the borrower’s ability to make the monthly principal and interest payments, rather than the collateral. Subordinated debt of this type, from MCRC and other similar lenders, is far more flexible than what a bank can offer, but it generally bears higher interest rates.
Other Cash Flow Lenders doing business in Massachusetts
HighPoint Capital Management, LLC
Prospect Capital Corporation