We’ll help you grow where other lenders don’t go.
We’re a fresh and resourceful lender, putting our capital to work in promising businesses.
Promising Canadian companies often do not have access to sufficient financing to truly transform their trajectory because:
- 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 gap is what our Gap Debt™ product aims to fill. This offering embraces the bold and independent mindset upon which FirePower Capital was founded.
Gap Debt™ 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 Gap Debt™?
Gap Debt™ is a term debt product for companies seeking between $1 million and $5 million.
These companies typically need additional financing to:
- Grow aggressively;
- Bridge themselves to the next equity round; or
- Make an acquisition.
In more unusual situations, our capital can be used to refinance an existing lender or recapitalize to “take chips off the table”.
There’s a common thread across all of the companies we work with. Their ownership and management teams have strong visibility into operating cash flows (even if negative) and their enterprise value.
These companies often question whether they should raise debt or equity. When equity is available to a company, Gap Debt™ can be a cost-effective substitute or complement to it, reducing the cost of dilution to existing shareholders, and allowing borrowers to retain more strategic control (at the board level).
When equity is not available, Gap Debt™ can help a company reach the point where it can conclude a raise. There, Gap Debt™ is cost-effective in that the opportunity cost of not raising money is often staggering.
Institutional equity backing is not a requirement for our involvement.
What we look for
$2m+ and annual growth above sector average, or monthly recurring revenue of $80k+
- 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 can be readily substantiated
Must have deep insights into the future of the business
Operators must have “skin in the game”, share our values, be an impressive and cohesive team, and have financial acumen
Must have a headquarters in Canada
- Use of Funds
Generally, for growth (acquisitions, working capital, etc.) and dividend recapitalizations
Typical terms of Gap Debt™
- Loan size
$1 million to $5 million
12 to 36 months
Interest rate>10%; Upside: warrants, equity kickers, bonuses, or royalties
- Security ranking
First position, or second position behind a line of credit
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: September 2017
The Ownership Advantage: Delaying a Series A with Venture Debt
You’re out of early-stage start-up territory (i.e. with revenues exceeding $2m). You are close to breaking even but need to continue spending to scale…
Last Call Analytics
Last Call, a big data and visualization software developer, needed capital to grow, but also needed strategic guidance to develop a stronger revenue model and a focused direction. FirePower invested capital in the business, and provided the strategic and operational guidance required to tap into the company's full potential.
GrowthGenius (“GG”) is an AI-assisted sales prospecting service provider for B2B businesses, headquartered at the OneEleven accelerator in Toronto. The company needed financing to fund its rapid expansion. Raising equity seemed like the obvious choice, but GG's exceptional growth prospects made an equity investment unappealing because of the high cost of dilution. GG sought out a debt solution, and were well into discussions with other lenders when FirePower was introduced.
Last Call Analytics
Last Call Analytics has developed a frontline sales analytics and visualization platform for the beverage and alcohol industry. FirePower invested Gap Debt as a way to bridge them to a Series-A financing.