We'll provide transformative capital where other lenders won't.
We’re a fresh and resourceful lender, who invests the time to understand your business.
Promising Canadian companies often do not have access to sufficient financing to truly transform their trajectory.
For mid- to long-term financings between $5 million and $20 million:
- Canadian banks do not move outside their well-defined credit boxes that rely largely on tangible assets. They find it challenging to underwrite future cash flows.
- Equity (from venture capital or private equity firms) is hard to come by, and if it’s available, that equity can prove to be incredibly expensive when the company goes on to enjoy exponential growth.
- There is growing availability of alternative debt providers willing to take more risk at a reasonable cost, but availability remains limited and many private lenders choose to focus on specific niches.
Therefore, raising this transformative financing is challenging for those promising companies.
This is why we created our Private Credit product. This offering embraces the bold and independent mindset upon which FirePower Capital was founded.
Private Credit can eventually lead to step-change transformation, such as a significant liquidity event, a major up-round, or a string of successful acquisitions. It can also set the stage for a refinancing on more favourable terms.
What is Private Credit?
Private Credit is a term debt product for companies looking for financing between $5 million and $20+ million.
These companies face the entire spectrum of circumstances, from ‘hypergrowth’ to special or distressed situations. What they have in common is that they need a lender to spend the required time to dig into those circumstances and to develop a deep understanding of them.
We issue Private Credit loans to companies with a track record of revenues, looking to increase or reassert enterprise value through debt. These companies may or may not be backed by private equity or venture capital, and are looking to reach a milestone, grow beyond existing lenders’ abilities, or delay their next equity raise to garner a better valuation.
These companies may also be asset originators (like asset-based lenders) looking for unique ways to securitize various asset classes, or to package asset classes together to form a new financial instrument.
What we look for
Recurring, repeating, or long-term contract-based revenue model, with low customer churn
- Visibility into cash flows
Must have excellent visibility into cash flows (even if negative); if cash flow negative, must anticipate break-even within 18 months
- Enterprise value
Business value in an M&A context or value of various asset classes to be securitized can be readily substantiated
Must have deep insights into the future of the business
Operators that share our values, are an impressive and cohesive team, and have financial acumen
Must have a headquarters in Canada
- Use of Funds
Generally to support growth, refinancing, buyouts, acquisitions, recapitalizations, asset securitizations, or special situations
Typical terms of Private Credit
- Loan size
$5 million to $20 million
12 to 48 months
Interest rate >10%; Upside: warrants, equity kickers, bonuses, or royalties
- Security ranking
First position or second position
Flexible: capital can be made available on closing, or in multiple tranches tied to growth milestones
- Principal repayment
Tailored to growth strategy, e.g. deferral of principal payments for up to length of term, large bullet payment at end of term, seasonality adjustments
From the archives: January 2020
2020 Dealmaking: Insights from Global and Canadian Experts
New year, new decade. We’re entering 2020 with an air of cautious optimism for Canadian deal making. The Phase 1 China-US deal and the…
F12.net, a leading Canadian Managed Service Provider (MSP), was executing on a roll-up acquisition strategy. The FirePower team built a comprehensive target list and crafted a story emphasizing F12’s corporate culture, growth and financial strength. Of the potential targets, Apps on Tap represented an exciting synergistic addition for F12. With FirePower’s support, F12 acquired Apps on Tap in May 2018.
CSR Cosmetic Solutions
The owner of CSR had taken over the business out of bankruptcy. After successfully building it into one of the largest cosmetic contract manufacturers in North America, he was ready for a well-deserved retirement. A previous sale attempt (by a top-tier accounting firm) was unsuccessful in 2015.
FirePower was engaged to prepare PrintFleet for a a sale, and guide the company through to closing. Weeks before closing, the buyer with whom PrintFleet signed an LOI following a competitive auction, a Japanese Fortune 500 company, terminated the deal because of an internal reorganization. FirePower re-ignited conversations with a US strategic who had done well in the auction, and closed without any major challenges at an attractive price, terms and conditions.