We define the lower middle-market as companies with annual revenue ranging from $15-150 million. We will selectively consider companies with less revenue but do not finance pre-revenue startups.
We believe the most important quality in any financial partner is how they manage things when they don’t go according to plan. Anyone can lend money in good times, but an ideal financial partner embraces change and opportunities from the outset, despite the fact that there are simply no assurances. We seek to understand, listen and look forward , and we do so with a passion for providing relevant and attainable immediate, short or long-term financial solutions.
We take a forward-looking approach to due diligence at Scargo Hill Capital. It is important that we receive the following documents to evaluate a loan. All information should be submitted electronically whenever possible.
Nothing about Scargo Hill Capital is set to fit into a “box.” We look to operate outside a box and seek to excel in situations and opportunities which parallel our understanding of an asset class, industry sub-sector or situational opportunity across the life cycle stage in any business.
We believe that no two transactions have the same exact attributes. We also don’t “max out” on industry exposure. However, we do instill strong credit disciplines to evaluate sub-sector concentrations. We seek to optimize liquidity across all asset classes. We own credit risk, we embrace change and we adapt.
We don’t ask what you need, but rather ask, what is the most we can provide?
Our first task in any transaction is to listen so that we can better understand your needs. Listening is our most important and greatest skill set in any diligence process. It is also a critical success factor of all good working relationships. We believe it is our responsibility to understand your immediate, short- and long-term goals, as well as the circumstances surrounding the current situation and/or opportunity, so that we can gain a full appreciation for how we can be of help.
We make it a point to work in partnership with you so that we can execute effectively and efficiently toward a common goal. In our experience, the best path forward is always crafted by your direct input and our industry expertise. We may also involve outside financial professionals and advisors, but only those who understand, value and support our collaborative approach, stated objectives, budget and timeline.
A realistic expectation for diligence is 4-6 weeks from the time a term sheet is fully executed. There are many factors that contribute to an effective and timely due diligence process, including the following critical success factors:
We believe that proper planning promotes a predictable path and that communication is essential to every successful engagement. That is why each week Scargo Hill Capital will review with the borrower what is to be accomplished, whether it indeed was accomplished and how best to complete all due diligence that is required or that becomes necessary because of findings during the process.
Keep in mind that there are many things that could impact this timeline and lead to costly and unproductive delays, including:
Work fees are budgeted for and determined on a case by case basis – these fees do not represent a profit center for Scargo Hill Capital. All costs are direct pass through to the borrower and are necessary to effectuate a transaction. In order to help you plan and manage work fees, a budget estimate is provided in advance of commencing due diligence. This estimate is reviewed on a weekly basis against actual expenses incurred.
It is important to understand that we treat work fee deposits with great respect. We take great care to minimize these costs and to encourage all third-party providers to do the same. Upon funding, all remaining work fee money is applied toward closing costs.
All work fees are non-refundable.
The Loan Committee is comprised of Scargo Hill Capital’s management team and its investors. Management are owners of the company and take a vested interest throughout the entire relationship. We are all extremely accessible and visible and our decision-making process is “flat.”
This Loan Committee is aware of all term sheets issued and keenly aware of our “work in process.” We believe that timely communication and full transparency helps avoid surprises for everyone involved and ultimately leads to optimal execution.
Daily management of the lending relationship is handled by Scargo Hill Capital’s Management team, from initial contact and underwriting through repayment of the loan.
Our financial reporting requirements are designed to mirror your existing internal reporting as closely as possible. Occasionally, we may ask that certain information be formatted specifically to our format and that it be submitted electronically. However, we always strive to minimize special reporting requirements or any reporting that may be designed specifically for Scargo Hill Capital. The best example of unique reporting required may be the Borrowing Base certificate, which is a summary of assets, availability and loan balance; these also will be submitted electronically.
Audited financial statements are always preferred but not required. On occasion, we will accept reviewed (but never compiled) financial statements. While we have no specific system requirements, effective systems, overall data integrity and your ability to report financials and key performance indicators (KPIs) are vital to the diligence process, key underwriting criteria and subject of credit committee consideration.
Dominion of cash is the lender’s protocol to safeguard cash proceeds of assets, where such proceeds are designated to flow through lender-controlled concentration or “blocked” accounts that are designed to give all parties visibility. Your existing treasury and cash management relationships are not affected, and local depositories need not change. Proceeds swept through cash dominion are applied to reduce the loan balance outstanding, minimize interest costs and increase borrowing availability under the facility. Please see the available download chart for typical illustration.
Nobody at Scargo Hill Capital ever disappears. Once the loan is closed, you are assigned an experienced, accessible and dedicated account officer who manages no more than 8-12 relationships at any one time. Our C-level managing partners and principals of the firm are always accessible and typically remain involved to ensure that we understand and remain sensitive to your vision and strategy, as well as short- and long-term goals and business objectives.
We will gladly provide references upon request. We are also happy to arrange any meetings at our headquarters or yours.
NOLV is the Net Orderly Liquidation Value of a pool of collateral (most often inventory). The NOLV represents the final realization of proceeds generated from liquidated collateral, after all operating costs and fees associated with a liquidation sale have been conducted. NOLV is an assessment of the optimal return on a pool of collateral, balancing the cost savings from a short sale period with the desire to maintain higher average margins throughout the sale. A variety of factors impact the assessment of NOLV, including sales and margin trends, sales and inventory mix, existing discounting and clearance practices, seasonality, and days sales on hand.