NEW YORK — Traditional commercial banking relies almost entirely on historical GAAP EBITDA to calculate debt borrowing capacity. For modern enterprise software-as-a-service (SaaS) and recurring technology companies, this legacy metric creates an impossible barrier. High-growth software firms intentionally reinvest gross profits into customer acquisition (CAC), research and development (R&D), and sales engineering — resulting in low or intentionally negative near-term GAAP EBITDA despite possessing sticky, highly predictable contract cash flows.
To serve this vital sector, Pinnacle Private Credit offers specialized Annual Recurring Revenue (ARR) Lending facilities ($5M to $30M) designed around unit economics rather than legacy accounting metrics.
How ARR Lending Operates
Rather than capping debt at a multiple of EBITDA, Pinnacle underwrites facilities as a multiple of contracted, verified Annual Recurring Revenue:
| Underwriting Metric | Target Benchmark | Why It Matters to Credit Underwriters |
|---|---|---|
| Minimum ARR Run-Rate | $10,000,000+ | Proves product-market fit and commercial scale |
| Net Dollar Retention (NDR) | 105% – 120%+ | Demonstrates negative revenue churn and successful upsell/cross-sell |
| Gross Revenue Churn | < 8% – 10% Annually | Validates that customers view the software as mission-critical |
| Gross Margin | 70% – 85%+ | High contribution margins provide strong free cash flow potential at scale |
| Typical Debt Multiple | 1.5x – 2.5x ARR | Provides non-dilutive capital without overwhelming the balance sheet |
The "EBITDA Flip" Covenant Structure
A hallmark of Pinnacle's technology facilities is the EBITDA Flip. During the initial 18 to 24 months, the facility is governed exclusively by minimum ARR growth hurdles and liquidity minimums. Once the company reaches pre-agreed scale, the covenants transition smoothly to standard cash-flow leverage and interest coverage metrics.
Tech founders and venture/growth sponsors can learn more under Corporate Funding or request a preliminary term sheet via our Technology Credit Desk.
Headquartered in New York, Pinnacle Private Credit is an institutional direct lender deploying $5M to $50M flexible credit solutions across North America. To discuss deal financing or review preliminary parameters with our Investment Committee, contact our direct lending desk.
Underwriting Desk: (212) 808 5966 • [email protected] • Submit Deal Parameters →