CASE STUDY: V.C.-backed Cybersecurity Company Enters Most Profitable Year with Non-dilutive Capital

Estimated reading time: 2 minutes

Background

Credit facility limit:
$2,000,000

General description: Cybersecurity

State of formation:

Virginia

Customer type:

U.S. Federal Government and Large Prime Contractors.

Issue

This Virginia-based cybersecurity company has developed and deployed their sensitive technology and demonstrated proven results with their customers. As a result of the technology’s market acceptance; they are projecting to quadruple sales and achieve their first profitable year in 2023. Although like many technology companies, they did not have the credit profile to secure a traditional senior working capital line of credit to support their upcoming growth; they are well supported by outside investor capital; including a well-known and respected Venture Capital firm. Due to upcoming expansion and accelerated growth; the company sought a financing solution that would support their short term working capital needs without further diluting senior management’s ownership interest.

Proposed Solutions

United Capital Funding (“UCF”) proposed an asset-based, accounts receivable factoring facility; which delivered a highly flexible working capital structure that is sufficient and elastic enough to grow along with their current increasing customer demand. Through this form of financing, the company was able to:

1. Secure an adequate credit facility collateralized by their accounts receivable; then they could have otherwise achieved by leveraging their current balance sheet under a traditional revolving line of credit.
2. Increase liquidity to support customer demand without raising additional dilutive equity capital.
3. Expand at an integral part of the company’s life cycle without restrictive covenants.
4. Decrease their overall Days Sales Outstanding by working with an institution that has been in business for 25 years supporting its customers with professional receivable management services.
5. Reduce senior management’s time and energy on cash flow management and therefore, allowing greater attention on growing revenues and ensuring customer satisfaction.