Middle market lending diversifies into trading cards, healthcare consolidation, and food & beverage M&A
The week ending July 27, 2025, reflected the typical summer market dynamics with reduced transaction volume and heightened focus on upcoming second quarter earnings reports from business development companies. The Federal Reserve maintained its restrictive stance with the federal funds rate remaining at 4.25%-4.50%, as futures markets priced almost no chance of a rate cut at the upcoming July 30 meeting. The combination of sustained elevated rates and the approaching BDC earnings season created a contemplative environment for middle market participants as they assessed portfolio performance against a backdrop of persistent monetary tightness.
Market attention centered on anticipation of Federal Reserve Chair Jerome Powell’s upcoming communications and the potential implications for middle market borrowers facing refinancing pressures. Powell acknowledged earlier this month that the Fed likely would have cut rates by now, but held off due to uncertainty and inflation risks posed by Trump’s tariff agenda[^1]. This dynamic continues to create uncertainty for floating-rate borrowers in middle market portfolios, where senior/unitranche loan borrowing rates have compressed by approximately 125 basis points in 2024 but remain at elevated absolute levels[^2].
Alternative Asset Classes Drive Specialized Lending Activity
The week’s most significant transaction exemplified the expansion of asset-based lending into unconventional collateral categories. Trinity Capital Inc. (NASDAQ: TRIN) announced a commitment of up to $40 million in an asset-based revolving credit facility to Alt Platform Inc., a dynamic online marketplace for investment-grade trading cards[^3]. The transaction represents a watershed moment for specialty finance, demonstrating institutional acceptance of alternative asset classes previously considered outside traditional lending parameters.
Alt Platform operates globally with its online marketplace available in 76 countries, offering authenticated card trading through fixed-price listings and curated weekly auctions, secure vaulting services, and collateralized lending programs[^3]. The company’s proprietary “Alt Value” AI-powered valuation tool provides real-time portfolio insights, addressing one of the primary challenges in alternative asset lending: accurate, dynamic collateral valuation.
Steven Lambe, Managing Director of Asset Based Lending at Trinity Capital, noted that “Alt’s focus on transparency and a full-service marketplace is helping unlock a new wave of demand for trading cards among collectors and investors”[^3]. The transaction highlights growing institutional recognition of collectibles and alternative investments as legitimate collateral classes, potentially opening new markets for specialized lenders.
Healthcare Sector Maintains Strong Lending Momentum
Healthcare continued to represent one of the most active sectors for middle market lending, driven by demographic trends and technological advancement. Healthcare lending has increased substantially in recent years, with healthcare making up 17.3% or $1.48 billion of institutional middle market volume in 2018, compared to just 5.3% in 2013[^4]. The sector’s appeal stems from its defensive characteristics and growing consolidation opportunities.
Middle market healthcare deals have averaged 6.3x EV/Revenue from 2021 through 2024, outperforming the average middle market revenue multiple from 2018 through 2020 by nearly three turns[^5]. Private equity activity in healthcare IT particularly remained robust, with the B2B market anticipated to lead sector M&A and financing activity throughout 2025 as healthcare providers become increasingly reliant on technology for performance improvement.
The week’s healthcare lending activity reflected continued focus on physician practice management, where substantial activity involves companies with significant capitation reimbursement components, typically requiring physician groups with large market scale and strong payer relationships[^4]. However, lenders remain cautious about EBITDA definition flexibility in healthcare transactions, with many emphasizing appropriately drafted definitions that limit non-recurring adjustments.
Food and Beverage Manufacturing Shows Resilience Amid Supply Chain Pressures
The food and beverage manufacturing sector demonstrated continued resilience during the week, supported by strong M&A activity and specialized financing availability. M&A activity in food and beverage remained strong in June 2025, with 36 announced transactions edging out May and sustaining elevated pace in recent months, with disclosed enterprise value topping $3 billion for the fifth consecutive month[^6].
Strategic and hybrid acquirers continued to drive volume, while private equity platforms remained selective amid ongoing financing headwinds[^6]. The sector benefits from defensive characteristics and essential product demand, though manufacturers face ongoing challenges from inflation, supply chain disruption, and changing consumer preferences toward sustainability-focused brands.
Asset-based lending has proven particularly attractive for food and beverage manufacturers facing working capital pressures. The sector often involves unique assets including inventory and equipment that can serve as collateral, with finished products eligible for inclusion in borrowing bases for distributors and importers[^7]. Specialized lenders have developed expertise in appraising food inventory and equipment, enabling more aggressive advance rates than traditional bank facilities.
Interest Rate Environment Sustains Pressure on Refinancing Pipeline
The Federal Reserve’s position on rate reductions maintained pressure on the substantial refinancing pipeline facing middle market borrowers. The 30-year mortgage rate stood at 6.8% as of June 2025, representing a massive jump compared with the 3.0% average in 2021[^8], illustrating the broader financing cost challenges across debt markets.
For middle market borrowers, the persistence of elevated base rates particularly affects those with upcoming maturity dates. Recent refinancing activity in private credit appears robust, with maturities of private credit held by BDCs down 55% for 2024 and 22% for 2025 relative to first-quarter 2023. However, this activity has pushed refinancing pressures forward, with maturities for private credit held by BDCs and interval funds peaking in 2028, when nearly $60 billion comes due[^9].
The interest rate environment continues to favor factoring and asset-based lending structures, where borrowers can access working capital without taking on additional term debt. The asset-based lending market is expected to continue growing at a CAGR of 16.39%, reaching USD 1.65 trillion by 2030[^10], reflecting the appeal of collateral-backed financing in the current environment.
Private Equity Activity Shows Mixed Signals
Private equity activity during the week reflected the broader market’s cautious stance, with some middle-market private equity firms facing cash crunches and selling assets at steep discounts as fundraising becomes increasingly challenging[^11]. The contrast between well-capitalized sponsors and those facing liquidity pressures continues to create divergent outcomes in middle market transactions.
Despite these challenges, private equity firms are expected to play an even more prominent role in shaping mid-sized M&A deals in 2025, driven by attractive valuations and operational improvement opportunities. The sector’s focus has shifted toward add-on acquisitions, which made up over 80% of deals in the lower middle market, as PE firms pursue roll-up strategies and target family-owned and founder-led businesses.
Manufacturing Sector Adapts to Capital-Intensive Growth Requirements
Manufacturing companies continued pursuing specialized financing solutions to address capital-intensive expansion needs and equipment upgrades. The sector’s financing requirements span working capital for inventory buildup, equipment purchases for automation and capacity expansion, and facility investments for regulatory compliance and efficiency improvements. Manufacturing loans offer improved cash flow management and flexible terms that accommodate the sector’s unique cash flow fluctuations and seasonal variations[^12].
The week reflected ongoing interest in equipment financing and asset-based lending structures that provide manufacturers with alternatives to traditional term debt. Automation investments improve speed, consistency, and unit cost, while facility expansions support higher output through adjacent space leasing or building out existing facilities[^13]. Specialized lenders have developed expertise in appraising manufacturing equipment and inventory, enabling more aggressive advance rates for creditworthy borrowers.
Private Equity Healthcare Activity Reaches New Highs
Healthcare private equity demonstrated exceptional momentum, with global healthcare private equity reaching an estimated $115 billion in 2024, achieving the second-highest deal value total on record[^14]. The surge was propelled by an increase in large deals, with five transactions exceeding $5 billion in 2024, compared with two deals in 2023 and one in 2022[^14].
Biopharma led all other healthcare segments in deal value, with growth fueled by investments in clinical trial IT infrastructure and manufacturing capacity expansion[^14]. North America continued representing the largest market with 65% of global deal value, while derivative services boosted provider deals and healthcare IT investments targeted core systems and revenue cycle management within the provider space.
The activity reflected ongoing institutional interest in healthcare’s defensive characteristics and demographic-driven growth prospects, though pressures on private provider and retail health groups have lasted longer than anticipated, with varying regulations across regions requiring significant operational investments to reach scale[^14].
Market Structure Evolution Continues
The week underscored ongoing evolution in middle market debt structures, with increasing institutional focus on alternative approaches beyond traditional direct lending. Private credit has been a major beneficiary of the ‘democratization’ of alternatives, with private wealth vehicles such as BDCs, interval funds and tender offer funds now holding over $400 billion in AuM[^15].
Blackstone’s flagship non-traded BDC, BCRED, is now the world’s largest private credit fund, with $66.6 billion in AuM[^15], demonstrating the scale and institutional acceptance of alternative middle market lending structures. This growth reflects investor appetite for yield generation in an environment where traditional fixed income returns remain challenged by duration risk.
The continued expansion of specialty finance and opportunistic credit strategies provides middle market borrowers with additional financing options. Between them, specialty finance and opportunistic credit accounted for 30% of mandates tracked in 2024, up from 21% in 2023[^15], indicating growing investor and borrower acceptance of non-traditional structures.
Items to Consider
Evaluate Alternative Asset Collateral Opportunities. The Trinity Capital-Alt Platform transaction demonstrates institutional acceptance of non-traditional collateral classes, suggesting opportunities for lenders to develop expertise in collectibles, intellectual property, and other alternative assets with established markets and valuation methodologies.
Monitor Healthcare Consolidation Trends. With healthcare representing 17.3% of institutional middle market volume and averaging 6.3x EV/Revenue multiples, the sector offers attractive lending opportunities, particularly in physician practice management and healthcare IT, though lenders should focus on EBITDA definition discipline and payer relationship quality.
Assess Food and Beverage Manufacturing Positioning. The sector’s sustained M&A activity with $3 billion in disclosed enterprise value and defensive characteristics make it attractive for asset-based lending, especially for borrowers with strong inventory management and established distribution relationships.
Focus on Technology-Enabled Lending Platforms. The convergence of AI-powered valuation tools and specialized lending creates opportunities for middle market lenders to enter new asset classes and improve underwriting efficiency while maintaining appropriate risk management standards.
Conclusion
The week ending July 27, 2025, showcased the middle market’s continued evolution toward specialized lending structures and alternative asset classes, highlighted by Trinity Capital’s groundbreaking $40 million facility for trading card collateral. While Federal Reserve policy remained restrictive, innovative transactions in healthcare, food and beverage, and alternative assets demonstrated the sector’s adaptability and institutional appetite for non-traditional opportunities. The intersection of technology-enabled valuation, defensive sector positioning, and creative collateral structures continues reshaping middle market lending beyond conventional corporate cash flow transactions. As traditional lending parameters expand to accommodate alternative assets and specialized industries, market participants must balance innovation with disciplined risk management while preparing for an extended period of elevated base rates and economic uncertainty.
Footnotes
[^2]: Middle Market Leveraged Finance Report – Winter 2025
[^3]: Trinity Capital Inc. Provides Alt Platform Inc. with up to $40 Million Asset Based Credit Facility
[^5]: Healthcare IT M&A Update – January 2025
[^6]: June 2025 Market Update: Food, Beverage and Agribusiness | Mesirow
[^7]: Food Business Financing | Finance Beverage Business
[^8]: How Much Will the Fed Cut Interest Rates? | Morningstar
[^9]: BDCs Extend Private Credit Maturities As Financing Eases | S&P Global Ratings
[^10]: Asset-Based Lending Market Forecast Report 2025-2030
[^11]: Private Equity Capital Freeze Stalls Midsize Firm Growth – Bloomberg
[^12]: Manufacturing Loans: Guide for 2025 | National Business Capital
[^13]: Loans for Food and Beverage Manufacturers: Expanding Production Lines
[^14]: Healthcare Private Equity Market 2024: Year in Review and Outlook | Bain & Company
