Stretch Financing

In today’s fast-moving and competitive business climate, small and lower-middle-market businesses often find themselves stuck in challenging middle ground. Despite solid growth potential, many are:

  • Too large for micro-lending or SBA financing
  • Yet too early-stage, asset-light, or structurally complex to qualify for a traditional credit facility
  • Reaching credit limits with no room for expansion
  • Missing opportunities due to insufficient capital

In many cases, companies that have established credit facilities find themselves “capped out” and thus unable to access additional liquidity due to collateral constraints, covenant limitations, or debtor concentration risk. This is where stretch financing can serve as a strategic and flexible capital tool. Tailored to support growth-stage companies with momentum yet limited access to working capital, stretch financing is a powerful and flexible solution to close critical funding gaps.

The Origin of Our Stretch Programs

In 2021, we began developing a funding solution specifically designed to complement the facility structures provided by factoring firms. This initiative gave rise to what’s now known industry-wide as our “Stretch Piece” program — a streamlined over-advance solution. Building on that success, we’ve since expanded our offerings to include the “Stretch Loan” and “Stretch Flex”, providing flexible capital structures that help entrepreneurs "stretch" across funding gaps, seize opportunities, and maintain momentum.

What sets up apart is our underwriting models and risk comfort, which allow us to confidently take a subordinate/junior position behind a factor’s priority claim on B2B receivables. Factors appreciate this flexibility and regularly refer clients to us when they’re unable to extend additional availability to their clients. This flexibility allows us to step in when advance rate limits prevent further lending — injecting fresh powder without disrupting the underlying relationship. Most importantly, factoring firms and ABLs alike, regularly refer clients to us because they know we bolster — not replace — their position responsibly. 

Stretch Financing accommodations are typically structured to:

  • Sit in a subordinate or junior position behind a senior credit facility
  • Operate on a revenue-based or performance-based repayment model
  • Offer non-dilutive growth capital that aligns repayment with cash flow
  • Accelerate growth and expansion

For businesses in transition, expansion, or post-SBA graduation, Stretch Financing allows:

  • Continuity of growth initiatives without a rehaul to the cap stack
  • Preservation of ownership by avoiding early-stage equity dilution
  • Flexibility in payment timing and structure that complements the working capital cycle
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Stretch Financing in Action. Common Use Cases:

  • Managing seasonal cash flow dips
  • Boosting inventory for peak sales periods
  • Deposits to suppliers
  • Fulfilling purchase orders
  • Preferential bulk purchasing opportunities.
  • Securing raw materials for production increases
  • Strategic hiring to leverage market opportunities
  • Bridging to liquidity events
  • Temporary mismatches between receivables and trade liabilities
  • Covering overline requirements
  • Geographic expansion
  • Equipment and infrastructure upgrades
  • Investor/partner buyouts

What we look for:

  • Predictable cash flows and revenue visibility
  • Strong gross margins and operating discipline
  • Management experience and sector knowledge
  • Annual revenue: $1.5MM+
  • QoQ Growth Traction or near-term visibility to cashflow-positive status
  • USA, Canada or UK-based operations

Capital Source
Proud to be ranked on the 2024 Inc. 5000 list of America's fastest-growing private companies

Stretch financing fills a critical funding gap for small and lower-middle-market businesses that are ready to grow but often overlooked by traditional lenders. These companies may be scaling rapidly, acquiring new assets, or transitioning through pivotal stages — yet they remain underserved by conventional credit sources.

Whether bridging between funding rounds, supplementing a credit line, or fueling time-sensitive opportunities, Capital Source provides stretch financing solutions that growth-stage businesses need to propel forward — on their terms.

Have a deal or scenario to discuss? Contact Capital Source at (888) 443-3766 or email us at [email protected].