Growth Lending Market, COVID Edition

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'