With continued economic uncertainty regarding how the global pandemic will disrupt key supply chains and buying patterns, combined with turbulence in the oil markets, it is likely that lenders will begin to pare back their respective risk appetites. This can have a compounding negative impact on borrowers who are looking for flexibility from their financing partners to help them work through challenges presented by the prevailing economic headwinds, leaving business owners with fewer viable liquidity options.

Lower-middle-market businesses have largely borne the brunt of the pandemic’s impact. In contrast to their larger counterparts, these businesses typically do not have the robust balance sheets, substantial liquidity cushions, or access to additional capital necessary to weather market shocks and a prolonged macroeconomic downturn.

This sector of the market is of great importance to Stonegate Capital and the operating thesis on which the company was founded. Since its inception, Stonegate has been focused on being an additive resource for companies with less than $100 million in revenue who are not yet best served by commercial banks due to those institutions’ more rigid lending parameters. When Andrea Hedrick (formerly of Wells Fargo Capital Finance) ascended to the role of Stonegate’s CEO in early 2019, her prior experience reaffirmed this thesis: many exceptional lower-middle-market businesses weren’t a perfect fit for the static approval hurdles imposed by traditional sources of senior debt. Instead business owners desired a more nuanced approach to lending. Thus, there was a large area of opportunity in the lending space for an alternative funding source whose leadership team was cognizant of these realities and who had creative solutions to bring to the market.

Stonegate’s mission to be a flexible resource to strong lower-middle-market businesses is even more imperative in today’s dislocated lending environment, as many other lending institutions are either sitting on the sidelines or imposing more onerous restrictions on existing customers. Stonegate Capital has stood by its portfolio to support the individualized needs of its borrowers and has provided financial flexibility during uncertain economic times.

In addition to its team members’ dedicated focus on servicing existing customers, Stonegate Capital remains open for new business and is continuing to focus on providing flexible, creative $2-$15 million senior credit facilities to: (i) asset-intensive businesses in the lower middle market, (ii) rapidly growing consumer brands, and (iii) burgeoning software/tech companies. When Stonegate collaborates with prospects while putting together comprehensive financing structures, an emphasis is placed on the key objectives of ownership and management in order to provide the requisite liquidity that the business needs to reach its goals.

Several executives that have worked with Stonegate were kind enough to offer their feedback, as shown below:

“The Stonegate team worked with us to customize a flexible solution that enabled us to streamline our capital structure and drive efficiencies to our free cash generation. This year will be a transformational year for JSI, and we are excited to partner with Stonegate as we continue to build the JSI platform.” - Bill Bronander, Vice President, RFE Investment Partners.

“Stonegate has been a pleasure to work with. The origination process was completed quickly, they have accommodated our unique ways of doing business every step of the way, and the staff is very responsive. We also appreciate being able to automate the borrowing base reporting process through their online portal. Thank you, Stonegate.” Bill Beech, CFO, Zevia

“The U.S. middle market is comprised of over 200,000 companies with $10 million to $100 million in annual revenues. These companies account for over $10 trillion of annual revenues (approximately one-third of the U.S. corporate universe) and about 30 million jobs. Most of these businesses are privately held. Even in good economic times, many middle market businesses report capital constraints with limited access to capital to fund growth and other business needs. Stonegate excels at helping middle market businesses gain the vital capital resources necessary to succeed.” Tom Gregory, Chairman, Stonegate Capital

Stonegate’s 2019 was one for the record books as deployed capital investments were up 35% plus year over year, surpassing key internal milestones for loan commitments. During 2019, Stonegate deepened its expertise with the addition of Tom Gregory as the new Chairman of the Board. As the Founder, former CEO and CIO of Maranon Capital, L.P., Tom is an entrepreneur with over thirty-five years of demonstrated success in private credit and equity investments who remains a tremendous addition to the Stonegate platform.

The Stonegate team is looking forward to continuing its positive momentum in 2020, especially given this crucial time for lower market businesses to lean on a stable financing source. For new investment opportunities and guidance as to how Stonegate is serving companies during these uncertain times, please reach out to Jay Fabian, Managing Director or Garett Figueroa, Director who are acutely focused on being an additive resource for companies exploring new lending relationships.