A combination of tight credit and stringent lending criteria has created a large, underserved segment of the debt market that does not have access to capital from traditional lending sources. This has resulted in a decline in lending to businesses and entrepreneurs in the lower middle-market (defined as companies with annual revenues up to $100 million).
Over the five-year period from 2017 to 2021, approximately $435 billion of U.S. lower middle-market debt will mature, with much of it needing to be refinanced. The combination of this “wall of maturity,” new financing that will be required by lower middle-market businesses, and many traditional lenders pulling out of the space have and will continue to create an environment in which lenders to lower middle-market companies have tremendous opportunity. Unlike traditional high-yield debt and syndicated loans, which tend to be highly standardized with little room for negotiation, lower middle-market lenders can structure loans tailored to the needs of individual companies. GPB Capital targets this underserved market by making secured loans to small and medium-sized businesses primarily located in North America.