L.O.T.W. #141 - Nerdy Gets Smart with New Growth Capital Term Loan
Structured term loan from Hercules Capital bolsters Nerdy's balance sheet as the company drives towards non-GAAP profitability.
In November 2025, Nerdy Inc. entered into a term-loan agreement with Hercules Capital, Inc. for up to $50 million, of which $20 million was funded at closing. The four-year facility matures in 2029 and features a 36-month interest-only period (extendable by 12 months), followed by principal + interest amortization. The loan is secured by substantially all of Nerdy’s assets and carries customary affirmative and negative covenants and a delayed-draw feature to help manage carrying costs and draw when needed.
👓At a Glance
Origination Date: November 3, 2025
Borrower: Nerdy, Inc. and subsidiaries
Lender: Hercules Capital, Inc.
Deal Size: $50.0 million
Structure: Two tranche term loan with a TTM contribution margin borrowing formula governing total debt outstanding
36 month interest only, extendable to 48 months upon achievement of certain performance milestones
Borrowing base = TTM contribution margin multiplied by an applicable ratio as follows
Closing -> September 30, 2026: 1.0
October 1, 2026 -> September 30, 2027: 0.80
October 1, 2027 -> September 30, 2028: 0.70; and
at all times on and after October 1, 2028: 0.60
Rate: Variable, greater of Prime + 3.50%, or 10.75%
Term: ~48 months
Use of Proceeds: General corporate purposes
Source: Press Release
📷Borrower Snapshot
Sector: Consumer Discretionary
Subsector: Diversified Consumer Services
Commercial Stage: Revenue generating; LTM EBITDA (-)
Business Overview: Nerdy, Inc. is a leading education-technology company that transforms how learners of all ages engage with knowledge through its flagship platform, Varsity Tutors. The company’s proprietary, AI-enabled live-learning platform connects students to expert instructors across 3,000+ subjects and supports multiple formats—one-on-one tutoring, small group classes, large live sessions, on-demand study tools and adaptive self-study. Leveraging advanced data-driven matching, the platform uses AI to pair learners with the optimal expert and continually refine instructional delivery, aiming to improve outcomes and satisfaction. Nerdy serves both direct-to-consumer learners and institutional clients (schools, organizations) and is positioned to scale by combining technology, human instruction, and network effects in a growing online-learning market.
⚙️Structure & Terms
Source: SEC 8-K
Commitment: $50.0 million multi-tranche term loan
$30.0 million available at close ($20.0 million drawn at close)
$20.0 million available subject to the approval of lenders
Maturity: November 1, 2029
Collateral: First priority all asset lien
Rate: Variable, greater of Prime + 3.50% or 10.75%
Fees:
Due Diligence Fee - $75k
Initial Facility Charge - $300k; Tranche 2 Facility Charge - $200k
Prepayment Fee - 2.0% prior to 1st Anniversary, 1.0% prior to 2nd Anniversary; 0.0% thereafter
End of Term Charge - 7.5%
Financial Covenant:
Min. Qualified Cash - greater of a) $15.0 million, or b) qualified cash balance that results in remaining months liquidity of no less than 6 months
The borrowing base structure is particullarly clever here. The declining multiplier from 1.0 to 0.60 over time creates a natural deleveraging mechanism as Nerdy scales towards profitablity. The extended interest only period gives them flexibilty to invest in growth while the TTM contribution margin covenant aligns lender and borrower incentives nicely.
The stepdown borrowing base structre is pretty clever here. Starting at 1.0x TTM contribution margin and working down to 0.6x by 2028 gives them plenty of breathing room early on while they ramp towards profitabilty. That 7.5% end of term charge is steep though. The delayed draw feature on the extra $20mm makes a lot of sense to minimze interest carrying costs until they really need it.