GTF - Global Technology Finance

(* It is our policy not to publish our client's name. The solution provider is referred to as SP)

SP interfaced and placed a purchase order (PO) with a technology vendor of their choice, in their own name. GTF guaranteed the vendor payment and assumed 100% of the liability for the payment. SP was out ZERO cash and had ZERO financial liability to the vendor. SP removed the accounts payable liability and inventory from their balance sheet.

After receiving the product they ordered from the vendor, SP configured it for their end-user customer. SP billed the customer, in their own name, for the product and services. Then they sold the accounts receivable (AR) to GTF, striking the AR asset from their balance sheet. Retaining control over the account, SP collected the funds, interfaced with their end-user customer, and so forth. All SP funds were deposited into an SP lock box, in which GTF was a partner. SP received gross profit on the customer sale from GTF, less a finance fee, upon collection.

The key operative documents involved in this process were the Asset Purchase Liability Assumption Agreement (APLA), which articulated the assets purchased and liabilities assumed by GTF, and the Management Services Agreement (MSA), which articulated the responsibilities of SP and GTF in managing the assets and liabilities per the APLA.

GTF had no blanket lien on SP. There was no intercreditor agreement with the usual standstill periods, proceed direction, covenant trip wires, etc. The program greatly simplified SP's mezzanine and equity partner's flexibility to manage SP's investment as appropriate. GTF was cost-effective, enhancing SP's investment and debt coverage. There was no SP bad debt risk, and GTF's interests were fully aligned with those of SP. Along with SP's financing partners and management, GTF was a 100% beneficiary of SP's success in creating and executing a successful revenue and profit story. In summary, GTF brought significant industry and financial expertise to the table and helped all parties create value.

GTF did have recourse back to SP for assets purchased under the APLA for breach of certain operating clauses in the MSA. The significant operating recourse risks were as follows:

Regarding inventory purchased without an end-user PO: GTF viewed this as speculative inventory, and SP was not permitted to "spec" buy using GTF's balance sheet.

For an AR that was over 150 days old and was not a bad debt, GTF would assume that there was mismanagement by SP (e.g., bad billing, bad service, wrong solution) if a credit-worthy end user had not paid after 5 months.

There was potential liability for poor reporting or cash misdirection. The holdback amount in the event of a termination event was set for SP.

Note: The recourse risks assumed by SP as part of the GTF financing solution were identical to their "on balance sheet" operating risks.

Typical GAAP accounting may not record the "recourse" portion of the assets financed by GTF as a debt or senior obligation.

Inquire or call 949-955-1866 to find out if GTF is the right solution for you. You can also contact us through email at info@4gtf.com.