- Short answer
- Bankable in proportion to recurring revenue
- Best fit
- Line of credit against contracted MRR and A/R
- Also fits
- Factoring on commercial receivables
- Once bankable
- SBA 7(a) for acquisition
- What decides it
- MRR as a share of total revenue, and contract length
- Usual disqualifier
- Project-only revenue with no recurring base
Managed services and project work are different businesses
A managed services provider with contracted monthly recurring revenue has predictable income under agreement, and lenders treat that almost like an annuity. A project shop selling implementations is only as good as its next signature, and every quarter starts at zero.
Give MRR as a percentage of total revenue, with average contract length and net retention. A firm at 70% MRR on three-year agreements is a genuinely different credit from one at 20% MRR on month-to-month terms, even at identical revenue. This is the single most useful thing you can put in front of a lender.
Contract terms are the collateral
- Term length. Multi-year agreements with auto-renewal are worth substantially more than month-to-month.
- Termination provisions. A contract cancellable on thirty days notice is closer to month-to-month than to a term deal, whatever it says on the cover.
- Net revenue retention. Above 100% — expansion outrunning churn — is a strong signal and few small MSPs think to report it.
- Client concentration. The same rule as everywhere: one client above roughly a third of revenue gets priced.
Hardware pass-through distorts your margins
MSPs that resell hardware and licences often show large revenue at very thin blended margin, because pass-through is running through the top line. Break it out. A lender who cannot separate service margin from resale margin will assume the worse of the two, and it will cost you.
Hardware procurement also creates a working capital gap — you buy the equipment, then bill the client. That is a distinct financing need from your operating line, and it is often better solved with contract or purchase order financing.
Acquisition is the underused play
The MSP market is consolidating and small books trade regularly. Buying another provider's contracted client base is a strong SBA 7(a) use, because you are acquiring recurring contracted revenue with a documented renewal history — which is exactly what underwriting wants to see.
Where IT services files get declined
- Project-only revenue with no recurring base to service a monthly payment.
- Month-to-month agreements presented as recurring revenue.
- Hardware pass-through inflating revenue and hiding true service margin.
- Client concentration above a third of revenue.
- Deferred revenue on prepaid contracts booked as earned.
Send us the file either way. Send your MRR schedule with contract terms and we will tell you what it supports. Either way you get the memo, and you will know our fee before you commit to anything.
Common questions
- Is a it services business bankable?
- Bankable in proportion to recurring revenue
- What financing fits a it services business best?
- Line of credit against contracted MRR and A/R
- What do lenders look at for it services businesses?
- MRR as a share of total revenue, and contract length
- Why do it services businesses get declined?
- Project-only revenue with no recurring base
Industries with the same answer
These businesses look nothing alike, but the product that fits them is the same one — and usually for the same structural reason.