After looking at thousands of companies since 2016, we at 📝Assembled Brands have found two types of companies that are financeable but don't fit within our asset-backed 📝Credit Box:
- Subscription eCommerce Businesses
- Smaller Deals with Good 📝Unit Economics
Whenever we discuss brands with these characteristics, I pepper our credit experts with ideas for how we could do them. One structure is a covenant that, if subscription sales fall below an agreed level, lets the lender collect a share of the borrower's weekly sales until performance recovers.
The methods for implementing this kind of term are presently not ideal. The biggest risk is that the borrower could simply re-direct their merchant account proceeds to a new account we do not have access to. Of course, this would be fraud and the borrower would be in default, but during the time from redirecting the cash and curing the default, our potential for loss would increase significantly.
A 📝Cash Distribution Agreement system would make these types of terms and structures cost less to implement, enabling 📝Securitizing Micro Cash Flows in many industries.