As Australia’s economy evolves, mid-market businesses – those with 20 to 200 employees or turnover between $10 million and $250m – play a crucial role in innovation and job creation.
However, traditional bank financing often falls short of supporting these businesses, limiting their ability to expand. Peter Arnold (pictured above), CEO of GAP Business Loans, highlights this challenge:
“Mid-market businesses are caught in a bind,” Arnold said. “On the one side, there are the traditional banks that can be bound by tighter regulations, often unable to offer the flexible funding mid-market borrowers need.
“On the other, the competitive nature of the mid-market means those operating in it need quick, tailored solutions.”
Banks, constrained by strict regulations, are increasingly hesitant to lend to mid-market businesses.
This reluctance has created opportunities for the private credit sector, which now makes up 11% of business lending, compared to 5% in early 2023, according to the Reserve Bank.
“This has created a gap in the market, particularly for businesses that need [customized] financial solutions,” Arnold said. “Private credit offers flexibility, speed, and the ability to tailor loans to meet a business’s goals.”
Private credit lenders are positioned to meet the specific needs of mid-market borrowers, whether it involves expansion, working capital, or refinancing. Unlike traditional banks, private lenders can cut through bureaucracy and remove the burden of excessive paperwork.
“Banks can insist on regular and ongoing review clauses in their contracts,” Arnold said. “This can include revaluing property to assess loan-to-value ratios, reviews of interest cover ratios, and reassessing the borrower’s debt-to-income ratio.”
Without these stringent checks, private credit lenders can provide a more favorable option for businesses. This flexibility ensures companies can focus on growth without being slowed by constant reassessments.
In a fast-moving market, the ability to act quickly can make or break opportunities. Private lenders offer streamlined processes, allowing businesses to access funds faster than traditional lenders.
“The process is streamlined, and businesses can access funds quickly, allowing them to capitalise on opportunities as they arise,” Arnold said.
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