The Quiet Revolution in Private Credit — And Why Mid-Market Business Owners Need to Pay Attention
Scott Gelbard, Founder — SGI Global Partners / Managing Partner — Peak Ventures
Something significant has been happening in the capital markets over the past decade, and most mid-market business owners I speak with have only a vague awareness of it. Private credit — once a niche corner of the alternative investment universe — has grown into a multi-trillion-dollar asset class. It is reshaping how businesses access capital, how deals get structured, and what the true cost of growth really looks like. Understanding it is no longer optional for serious business owners. It is a competitive necessity.
I have spent a large portion of my career at the intersection of private enterprise and capital markets. I have watched businesses leave significant value on the table — not because the underlying opportunity was weak, but because the founder did not understand the full range of tools available to them. Private credit is one of the most underutilized tools in the mid-market toolkit. And in many cases, it is precisely the right one.
What Private Credit Actually Is — And Why It Matters Now
Private credit refers broadly to debt financing provided by non-bank lenders: private equity firms, credit funds, family offices, specialty finance companies, and institutional investors that have stepped into spaces that traditional banks vacated following the regulatory tightening of the post-2008 era. These lenders are not constrained by the same capital requirements, risk weightings, or political pressures that govern commercial banks. That gives them significant flexibility.
For a mid-market business — one generating, say, $5 million to $100 million in EBITDA — this flexibility can be transformational. Private credit lenders can move faster than banks, structure deals more creatively, take on complexity that bank credit committees will not, and price risk based on a holistic understanding of the business rather than a formulaic loan-to-value calculation.
Historically, mid-market companies had two realistic options for growth capital: bank debt or equity. Bank debt was cheap but inflexible and slow; equity was available but expensive in terms of dilution and governance intrusion. Private credit has opened a third path — one that often allows owners to retain full control of their business while accessing the capital they need to grow, acquire, or restructure.
The Structures That Are Changing the Game
Not all private credit is the same, and understanding the landscape is essential before engaging with it. The most relevant structures for mid-market business owners include:
Unitranche financing combines senior and subordinated debt into a single facility with a blended interest rate. It simplifies the capital structure considerably — one lender, one set of covenants, one relationship to manage — while still providing leverage levels that were historically only available with complex multi-lender stacks.
Recurring revenue lending has become particularly relevant for technology-enabled and subscription-based businesses. Rather than underwriting to hard assets or traditional EBITDA, these facilities underwrite to the predictability and growth trajectory of recurring revenue streams. For software businesses and service companies with strong retention metrics, this can unlock substantial capital that traditional lenders would not have provided.
Mezzanine and preferred equity structures sit in the space between senior debt and common equity — subordinated in the capital structure but priced to reflect that risk, often in the 12 to 15 percent range. For owners who do not want to sell equity but need flexible capital for an acquisition or expansion, mezzanine can be an elegant solution.
Acquisition financing through private credit has become the backbone of deal-making in the lower middle market. When a business owner wants to acquire a competitor or bolt-on asset, private credit lenders can frequently provide committed financing in a timeline that matches deal deadlines in ways that bank processes simply cannot.
The Risks That Do Not Get Talked About Enough
Private credit is not a free lunch. There are real risks that every business owner should understand before engaging.
The cost is real. Private credit is more expensive than bank debt — often meaningfully so. The blended cost of capital matters, and businesses need to be clear-eyed that the premium is justified by what the capital is enabling. If you are borrowing at 10 percent to fund growth that will generate 20 percent returns, the math works. If you are borrowing at 10 percent to fund operations that are marginally profitable, you are buying time, not building value.
Covenant structures deserve careful attention. Private credit lenders have more flexibility on deal structure, but they are still sophisticated creditors. The covenants in private credit agreements can be restrictive — sometimes more so than bank covenants — and a covenant breach can have serious consequences. Engage experienced legal and financial advisors before signing.
The relationship matters. Unlike public bond markets, private credit is a relationship business. Your lender will have ongoing visibility into your financials and your business trajectory. Choose lenders with a genuine understanding of your industry and a track record of constructive behavior with portfolio companies during periods of difficulty.
What Founders Should Do Right Now
If you are a mid-market business owner who has not yet had a serious conversation about private credit with your advisory team, now is the time. Not because you necessarily need it today, but because understanding the landscape before you need capital gives you dramatically more leverage when you do.
Map your capital structure. Understand what you have, what it costs, and what the terms are. Then map what growth requires over the next three to five years and work backwards to the capital structure that supports it.
Build relationships with private credit providers before you need them. Like all advisory relationships, the best ones are built before a transaction is imminent. Attend conferences. Have introductory conversations. Understand who the active players are in your sector and size range.
And perhaps most importantly, expand your definition of what "financing" means. The days when debt meant your bank and equity meant venture capital are long behind us. The capital markets available to mid-market businesses today are deeper, more creative, and more accessible than at any point in recent history. The founders who understand that landscape — and engage with it strategically — will have a measurable advantage over those who do not.
Private credit is not just a financial tool. Used well, it is a strategic one.
Scott Gelbard is the Founder of SGI Global Partners Inc., a boutique family office and strategic advisory firm, and Managing Partner of Peak Ventures, an international business consulting practice. With three decades of advisory experience across North America, Europe, and Asia, Scott specializes in capital markets strategy, mid-market growth financing, and cross-border business consulting. He advises founders, family offices, and private businesses on how to access and deploy capital strategically.
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