FAQs
Since our inception in 2006, Hunting Dog Capital, fills the void left by traditional lenders by providing non-dilutive growth capital in the form of senior term debt backed by tangible assets. Business owners maintain control and investors earn an unlevered current yield well above prevailing market rates that is uncorrelated to equity markets. Loans have a first-lien position and are backed by tangible assets as collateral to provide downside protection.
One of the best parts of our days is the time spent speaking with the management teams of small, growth companies across the US. We marvel at the ingenuity and entrepreneurial spirits of the companies that we speak with and are honored to meet the need of providing growth capital, especially to job creators, to this the oft overlooked and under-serviced segment.
Yes. The General Partners have personally invested in each loan and have a significant percentage of their personal net worth invested in the Hunting Dog funds.
We target gross, unlevered, risk-adjusted IRRs between 13-18% per loan with a 10%+ net return to investors. All fees and interest income, not of fund expenses, are distributed quarterly.
Returns are generated through the monthly collection of cash coupons that generally range between 12-15%. Additionally, we collect an upfront origination fee between 1-3% and a quarterly admin fee. Finally, we receive warrants with approximately 40% of our loans. All payments received, net of fund expenses, remain with the fund and are distributed to our investors.
No, the HDC Funds have never used leverage. However, in order to capitalize on select opportunities, such as funding a new investment in anticipation of a near-term payoff of another loan, we reserve the right to employ modest leverage where and when we deem appropriate. Of note: we would never use leverage as an alpha generator to “juice” returns.
We have the acumen, judgment and historical track record to successfully target small, US-based growth companies with tangible assets that seek loan amounts that are generally too small for more traditional commercial banks or larger competitors. Our experience and almost twenty years of working side by side provides further “check and balances” in conviction-weighted, decision making. As a result, we see less competition and are able to negotiate better terms and pricing. Moreover, by offering senior secured, collateralized debt, we are safeguarding investor capital should incremental or significant losses require recovery and remuneration for capital loss.
No, we do not take an active or activist role on our companies’ boards. In fact, most of the companies that we lend to are 100% owned by the Founder/CEO, so most do not have functioning boards. Also, as a lender, we are careful to avoid lender liability. However, we are an active resource and willingly share our decades of experience and contacts with our borrowers. Whether it is connecting the CEOs of two portfolios companies or encouraging other best practices, we engage with management teams to help them improve their businesses and repay our loans. Additionally, because of our position as a senior lender and our covenant-heavy approach that we monitor monthly, we can certainly exert significant influence, if needed.
We are covenant-heavy lenders. While each situation is unique, we measure our financial covenants on a monthly basis. They include minimum revenue; minimum EBITDA; minimum cash; a minimum collateral coverage ratio; limitations on distributions; and a maximum debt-to-EBITDA ratio.
We are generalists by design to ensure the highest level of deal flow. All potential borrowers must be US-based with tangible assets as collateral. While we have no hard restrictions, we make it a point not to invest in firearms, gaming, IP (biotech) or human capital businesses (consulting).
We have identified an abundance of opportunities that exist in the US today. The convergence of multiple factors -- political, social and economic -- has created an unprecedented opportunity as a lender to smaller US growth companies. We want to capture that opportunity with an emphasis on being socially responsible. We will remain opportunistic and geographically agnostic, but will focus exclusively on opportunities that meet our ESG guidelines, particularly job creators. Since inception, we are especially proud that our actions have saved or created hundreds of well-paying jobs across the country, galvanized communities and enabled entrepreneurs who “dared to dream” to realize those dreams, provide goods and services that matter and through their ingenuity, sweat equity and perseverance have delivered solid returns for their employees, for their families and for their investors.
HDC generally defines tangible assets as cash, receivables, inventory, equipment and real estate. We take a blanket lien on substantially all assets, including intangibles and IP, but do not assign any collateral value to intangibles.
While the income is "ordinary" and the fund is not tax advantaged, there are a variety of vehicles that would allow an investor to hold his/her investment in a self-directed IRA or wrapped in a single premium deferred annuity.
We seek US-based growth companies with a preference for job creators. Typically, companies that we lend to have annual revenue between $25-100 million, have concentrated ownership and well-established operating histories. While we have no specific industry or geographic preferences, we do require not only sufficient tangible assets (accounts receivable, inventory, equipment, real estate, etc.) to justify the loan amount, but also sufficient cash flow to support monthly interest payments.
One of the best parts of our days is the time spent speaking with the management teams of small, growth companies. We marvel at the ingenuity and entrepreneurial spirits of the companies that we speak with and would be honored to learn more about your past success and future plans.
Aside from simply loving dogs, the inspiration came from Todd’s aptly named Brittany puppy, Rowdy. The name Rowdy Capital was immediately rejected, unfortunately, but it did allow us to think about the characteristics of hunting dogs and the similarity of these traits to our investment style:
Patient
Disciplined
Adept at changing conditions
Energetic
Make work enjoyable
Typical uses include repayment of existing debt, equipment purchases, acquisition financing, working capital, share repurchases and shareholder dividends.
Loan maturities are between one and five years, but most are between three and four years with optional renewals.
Yes. Our loans include a provision to ensure that we collect at least twelve months of interest, but after that, a loan can be repaid without penalty.
Depending on the collateral coverage and profitability of the business, loans are generally interest only. The cash that would otherwise be used to amortize debt is then available to reinvest into and grow your business.
While each situation is unique, the loan amount is largely driven by the amount and nature of the available tangible collateral, such as accounts receivable, inventory, equipment and real estate, etc. We look for a mix of assets, but our starting point is at least one dollar of collateral for every dollar borrowed. Loans are structured a fixed rate terms loans with interest payable monthly in arears. Additional fees include a one-time origination fee at closing as well as a quarterly admin fee.
Yes. Covenants, which are monitored and tested monthly, are tailored to provided maximum operational flexibility while also providing us with downside protection for our loan.
Yes. It is not uncommon for borrowers to seek additional funding to continue growing their businesses.
After the receipt of an initial expense deposit, we run the diligence and legal processes concurrently. The entire process usually takes four to six weeks.
