A few sound bites below on the venture / growth lending market, COVID edition. Hope you are "Hanging in There."
Lender Sentiment: Trying to be helpful
amenable to IO resets / covenant relief, within reason
banks open to new or expanded facilities for well positioned clients (w/ tighter covenants)
avoiding price gouging -- relationships still matter
some non-banks facing significant portfolio / liquidity issues, while others viewing this as a time to ‘solve for yes’ and shine
Re-visiting underwriting...and slow
priority remains existing portfolio
PPP for banks = massive resource redeployment
credit decisions can require 2-4 weekly committee meets (vs 1)
extra upfront diligence – look thru of customer health in particular
let’s see how the next quarter plays out
Re-visiting terms
lower leverage, tighter covenants
higher rates, slightly
significantly more warrants
some non-banks offering structured equity options
On the Company Side: Exploring all available capital formation paths
equity now massively more expensive
considering debt to shore up cash
PPP offers immediate, short-term relief
requesting IO extensions or covenant relief
requesting expanded bank lines
Formulating (and executing) Covid financial plans
slashing new sales expectations; higher churn
significant opex cuts
extending cash runway > 18 mos
creating viable path to profitability / reasonable burn
Slow to raise capital from 3rd parties
pulling other levers first
prioritizing working with existing lender (and/or equity investors)
exceptions for those companies that are unleveraged or truly insulated from SIP
Takeaways:
think more broadly; severe market dislocation and inefficiency = wider range of options
not the time to worry about the little things or scrape for bps of interest rate
create backup options - term sheets can be flimsy
forecasts not adjusted to the new reality are fastest way to a 'no'