By Michelle Myers, SVP, Sales & Marketing at Faccorp International
There’s an interesting contradiction playing out in today’s capital markets. Private equity firms are sitting on trillions of dollars in dry powder, yet distributions are down, holding periods are getting longer, and more capital is tied up in aging investments than usual. On paper, there’s an enormous amount of capital in the system. In practice, liquidity still feels tight.
A Wall Street Story With a Main Street Lesson
In response, PE firms have gotten creative. Continuation vehicles, NAV lending, preferred equity, and other hybrid structures are increasingly being used to create liquidity without forcing a full exit. That might sound like it belongs entirely in the world of institutional finance. We think it’s becoming a Main Street story too.
When capital gets harder to recycle at the top of the market, investors and lenders become more deliberate about where they put their next dollar — and that discipline eventually works its way downstream to smaller, privately owned businesses. For a company doing $10 million, $20 million, or $50 million in revenue, that can mean tighter credit boxes, greater emphasis on collateral and cash flow, less tolerance for leverage or uneven performance, and fewer options for businesses that don’t fit neatly into a traditional lending model.
The issue usually isn’t that there’s not enough money out there. It’s that liquidity and available capital aren’t the same thing.
When Capital Gets Selective, Assets Matter
That distinction is exactly why asset-backed and structured financing tends to become more important in environments like this one. When traditional capital becomes more selective, the value of a company’s financeable assets becomes more important right along with it.
For a growing B2B company, one of the largest assets it has is often sitting right there on the balance sheet: accounts receivable. A business can be profitable and growing and still struggle to qualify for conventional bank financing for reasons that have nothing to do with whether it’s a good business — rapid growth, customer concentration, a recent acquisition or ownership change, a temporary loss, leverage, foreign ownership, or simply falling outside a bank’s current credit box.
A Different Question to Ask
A conventional lender typically asks one question: does this company fit a traditional cash-flow lending model? An accounts receivable lender can ask a different one: what is the quality of the asset generating the cash? Who owes the receivable? Is the work complete? Is it collectible? How quickly does the borrowing base convert back to cash?
That distinction matters, and we believe it will matter even more as institutional capital continues moving toward asset-backed and structured financing.
Capital Hasn’t Disappeared. It’s Changing Shape.
At Faccorp, this is the part of the market we find genuinely interesting: lower middle market and Main Street businesses that are fundamentally good companies, but don’t always fit neatly inside somebody else’s box.
Sometimes the best financing solution isn’t the most complicated one — it’s using what’s already sitting on the balance sheet. If your business needs working capital and doesn’t fit the traditional lending mold, we’d like to talk. Reach us at mmyers@faccorpintl.com or 225-439-8928.
