CASE STUDY
Working Capital
Sourcing new financing from a non-bank lender
PE- backed medical services company sought working capital for growth
- Challenge
A medical services company backed by a prominent sponsor needed a new lender to upsize their working capital needs. The sponsor had an internal capital markets team who had relationships with conventional banks and lenders. But the aggressive growth plan required the firm to either put in more equity or find a lender outside their relationship network — a lender who was willing to dig into the complex billing cycle of the company including a portion of unbilled AR.
The CFO was also concerned about the onerous process to switch from their current lender to a new partner. However, there was a major growth opportunity if they could unlock additional capital and improved terms.
- Cerebro Solution
The company’s PE firm engaged Cerebro to run a streamlined debt placement. Cerebro was able to quickly identify over 30 nonbank asset-based lenders whose underwriting profile matched the company’s needs. Cerebro also prepared a recorded lender presentation that clearly outlined the unique working capital cycle. This prevented the need for the CFO to sit on redundant explanatory calls. Cerebro further qualified lenders’ appetites and delivered written term sheets from the top six lenders.
The winning lender provided 80% advanced rates off unbilled AR and allowed the company to maintain its current lockbox procedures making the switch much easier.
Winning Term Sheet
- $5MM Loan - 20% larger loan commitment
- PRIME + 3.5%
- 90% advance rate on eligible A/R, 80% advance rate on unbilled A/R
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