Three seasoned executives reveal how lenders are winning deals, managing risk and strengthening relationships as the middle market enters a more selective, structure-driven cycle.
Middle market lending has entered a phase defined by precision. Capital is plentiful and competition is fierce, but lenders are choosing their spots more carefully, scrutinizing structures more tightly and leaning harder on credit fundamentals than they have in years. Deals are still getting done, often at a healthy clip, but only when borrower performance, collateral quality and reporting discipline meet a higher bar.
Against this backdrop, relationship management has never mattered more. Borrowers want clarity, flexibility and execution speed.
Sponsors want lenders who show up early, communicate often and stand firm when markets turn. And lenders themselves are recalibrating their models, rethinking risk and preparing for a 2026 shaped by tighter structures, smarter technology and closer alignment between bank and non-bank credit standards.
To get a clear view of the road ahead, ABF Journal spoke with three leaders who sit at the center of today’s ABL market: Jason Anish of Austin Financial, Robert Martucci of Rosenthal Capital Group and Marius Silvasan of eCapital. Their perspectives paint a sharp picture of where deals are flowing, which sectors are holding up, how relationships are evolving and what will define lending strategy in the year ahead.
How would you characterize the current state of the middle market lending environment, particularly in terms of deal flow, structure and competition?
JASON ANISH: I would describe the ABL middle market as selective but highly competitive across both bank and alternative lending sources. Capital availability continues to be strong, and lenders are actively seeking opportunities to deploy it. While there was a brief slowdown over the summer, deal flow has regained momentum.
Several forces are shaping today’s environment. Lower pricing, increased loan structure flexibility and a heightened emphasis on relationship management continue to drive competition. At the same time, tariffs and broader geopolitical risks are prompting lenders to be more cautious than in past years.
In this landscape, the most successful lenders are those who strike the right balance between staying firmly rooted in their credit culture while remaining opportunistic when high-quality opportunities arise. The greatest challenges tend to surface when lenders chase deals too aggressively, stretching beyond appropriate boundaries in an effort to be “everything” to their customers. Such overreach can lead to structures that fail to support the long-term health of both the lender and borrower.
Ultimately, sustainable success in the ABL middle market hinges on a measured approach: one that blends competitive agility with thoughtful underwriting and a steadfast commitment to sound credit principles.
ROBERT MARTUCCI: The pipeline for new deals remains steady and refinancings are prevalent. Lenders are being more selective with more scrutiny, and there is more competition than ever for fewer deals. Banks are starting to push out deals to find new homes during the fourth quarter. There’s also been a rise in poor reporting during due diligence, which has caused a pause in closings. In the current climate, sound structure is essential as borrowers are looking to unlock more availability.
MARIUS SILVASAN: The middle market remains active, but it’s more selective. We’ve moved from an era of abundance to one of precision. Deal flow is steady, but lenders are concentrating on borrowers with resilient performance and clear growth visibility. Structures have tightened, and we’re seeing stronger covenants, higher equity contributions and more emphasis on collateral quality. Competition remains intense, but it’s disciplined. The best-positioned lenders today are those that can combine speed and certainty of execution with sound credit judgment.
What sectors or borrower profiles are presenting the most promising opportunities right now, and which are showing signs of stress or slowdown?
ANISH: Manufacturing, IT staffing and service-based industries continue to lead current deal activity. Conversely, transportation has become more challenging to finance, with opportunities largely limited to lenders specializing in factoring solutions. Additionally, the ongoing government shutdown has slowed deal flow for businesses reliant on federal contracts. These evolving market dynamics underscore the importance of lenders staying closely aligned with sector-specific developments and shifting borrower needs.
MARTUCCI: Food and beverage seems to continue to be a leading industry looking for increased borrowings. High-growth direct-to-consumer businesses in particular, while still strong, have been adding wholesale to their business models. Therefore, inventory-only deals are not as prevalent as they were during the post-pandemic period. Service companies are also trying to leverage receivables to increase cash flow. In addition, we have been seeing more exporters looking to increase availability against their foreign A/R. As a result, we have been proactive in the space to help them find the right solutions when those businesses have foreign credit insurance and strong monitoring in place.
SILVASAN: Healthcare, logistics and business services continue to outperform, being sectors with durable demand and strong working capital cycles. These are the areas where we’re seeing healthy activity and credit appetite.
On the other end, interest-sensitive industries, particularly construction-adjacent manufacturing and discretionary consumer goods, are under more pressure. Many of those borrowers are focusing on liquidity preservation rather than expansion. In this cycle, access to capital is favoring stability over speculation.
How are rising interest rates and shifting credit standards affecting borrower behavior and lender risk appetite?
ANISH: Across the market, lenders, particularly banks, are placing renewed emphasis on underwriting discipline. This shift is reflected in detailed cash-flow modeling, rigorous interest-coverage stress testing, tighter covenant negotiation and deal structures built with clear downside protection, such as senior secured, asset-backed positions. Many lenders are also proactively preparing their teams for potential workout scenarios. While these practices are most pronounced among banks, they are strategies all lenders should incorporate at varying levels to protect the health of their portfolios.
While recent actions by the Federal Reserve indicate a shift toward a declining interest rate environment, the effects of the recent period of rising rates and tighter credit standards continue to influence market behavior. Both borrowers and lenders are approaching the current environment with increased caution. Borrowers, especially those with weaker cash flows, are under pressure and responding with more conservative strategies or seeking creative financing solutions. Lenders, in turn, are recalibrating risk, strengthening deal structures and leaning into defensive credit strategies supported by relationship-driven underwriting.
At AFS, our approach remains the same regardless of interest rate direction. We maintain consistent client profiles and credit standards, providing flexibility and stability across both rising and falling market cycles.
MARTUCCI: When interest rates increase, borrowers face higher payments, which means they borrow less or look for more affordable loans. However, our typical borrowers have no choice but to live with the increased costs and cut expenses in other areas. In this volatile environment, credit quality becomes an issue because operating performance and cash flow get dinged, and therefore borrowers with weaker credit profiles find it harder to qualify. Higher rates mean higher default risk, and therefore, lenders become more cautious. Fortunately, with the recent rate reductions, this area is rebalancing, but other factors can still come into play, like supply chain disruptions and uncertainty around tariffs. We find ourselves regularly re-evaluating underwriting criteria and watching operating trends closely.
SILVASAN: Higher rates have forced everyone to recalibrate. Borrowers are thinking strategically about their balance sheets — managing liquidity and extending maturities rather than chasing leverage. For lenders, it’s a return to fundamentals: collateral, coverage and character. We’re not seeing risk appetite disappear, but it has matured. Credit discipline has replaced cheap capital as the main competitive lever. In the end, strong relationships and data-backed underwriting are what’s keeping the market moving.
What trends do you expect to shape the middle market lending landscape in 2026 — structurally, strategically or technologically?
ANISH: I expect competition to remain very strong across the lending landscape. Banks, as regulated institutions, must operate within defined parameters, and this discipline will continue to create a steady stream of opportunities for alternative lenders. Asset-based lenders with deep industry experience, flexible loan structures and a relationship-focused approach will remain well-positioned to serve borrowers seeking capital outside of traditional banking channels. Additionally, I anticipate an uptick in creative financing and M&A activity, driven by private equity, investment banks and other middle-market-focused firms.
2026 will be a tipping point as private credit begins to meaningfully integrate artificial intelligence into its core operations. We’ll see increased adoption of automated financial spreads, predictive analytics for interest coverage and real-time insights derived from alternative data sources. Lenders will leverage advanced scenario modeling across varied interest rate environments to anticipate performance trends and surface emerging risks earlier in the credit cycle. While artificial intelligence will not replace the human capital side of the business, it will significantly augment decision-making, enhancing departmental effectiveness and improving early detection of underperformance.
Lenders will continue to prioritize asset coverage as rate pressures persist. As a result, I expect ongoing growth in areas such as ABL and first-lien lending, equipment finance and inventory- or receivables-backed revolvers. This emphasis reflects a broader focus on downside protection and higher recovery values.
I would characterize 2026 as a year defined by disciplined opportunity. Lenders with sector expertise, strong monitoring capabilities and sound credit cultures will be best positioned to succeed, while weaker borrowers and generalist lenders may face growing pressure.
MARTUCCI: Traditional banks are pulling back somewhat from middle-market leveraged financing, which creates space for non-bank lenders to step in. Alternative lenders are repositioning their credit profiles and being more selective and relying on more tech-enabled credit analysis. Borrowers will need to identify their financing strategy closely by choosing the right lender, identifying the right structure and being prepared for more rigorous underwriting.
SILVASAN: Three forces are reshaping the middle market: structure, consolidation and technology. Structures are becoming more disciplined as lenders focus on durability and balanced risk. Consolidation is creating larger, more specialized platforms with broader capabilities. And technology is accelerating everything; automation and AI are redefining how capital is deployed and monitored. The lenders investing in these areas now will set the pace for the next cycle.
In what ways are lenders adapting to maintain strong relationships with sponsors and borrowers in a more uncertain economic climate?
ANISH: At our firm, we pride ourselves on a relationship-driven approach, and we believe that one of the most important steps in building lasting client partnerships is taking the time to engage directly with company ownership and management teams. By understanding the nuances of each business, we’re able to deliver financing solutions tailored to their specific needs. To ensure these solutions are both effective and efficient, our sales and credit teams work closely together, collaborating to structure practical, thoughtful deals that have historically led to long-term partnerships. Open and honest communication, whether around opportunities or challenges, has been at the core of our partnerships, enabling us to support companies as they grow, prosper or navigate periods of uncertainty.
From my experience, proactive and transparent communication is one of the most powerful differentiators in lending. Lenders who engage early and consistently are viewed not just as capital providers, but as true partners. This means maintaining regular check-ins with borrowers and management teams, offering guidance throughout the relationship, sharing timely market insights and benchmarks, and planning ahead for potential scenarios. These efforts help build trust, minimize surprises and position the lender as a solution provider.
Speed and execution certainty also play a critical role, especially in uncertain or fast-moving markets. Lenders that can move efficiently through diligence, issue firm commitments early, streamline decision-making processes and support sponsors in competitive situations stand out. Sponsors and borrowers remember the lenders who deliver consistently.
Equally important is the ability to serve as a stable, collaborative partner during times of stress. Strong relationship lenders focus on solving problems, not just enforcing terms. They are willing to provide rescue or add-on capital when business fundamentals support it, avoid aggressive tactics unless absolutely necessary, view challenging situations as opportunities to help stabilize the business and treat adversity as an opportunity to support, not penalize, the borrower. By employing this focused approach, AFS positions itself as a long-term lending partner rather than a fair-weather participant.
In today’s uncertain environment, the lenders who are earning trust are those who remain flexible enough to help borrowers navigate volatility, disciplined enough to manage risk responsibly and collaborative enough to deepen relationships over time. Those who can consistently balance speed, creativity and sound credit judgment will be best positioned to capture quality deal flow and strengthen relationships in 2026 and beyond.
MARTUCCI: Lenders in 2025 are maintaining strong relationships through communication, modifying structure and staying consistent. The most effective lenders right now are acting as true partners by offering flexibility, transparency and strategic support, while maintaining rigorous credit discipline. The institutions that balance empathy with caution, the way Rosenthal is able to, are the ones that are emerging as the most trusted and competitive players in the middle-market lending space.
SILVASAN: In this environment, consistency builds confidence. The most effective lenders are being proactive, transparent and flexible. They’re structuring for both upside and downside scenarios and maintaining open dialogue throughout the cycle. At eCapital, we’ve built our approach around that philosophy, combining responsiveness with relationship depth. That’s how you stay relevant when the market changes.
CONCLUSION
If there is a single through line in today’s middle market, it’s that discipline and partnership now matter as much as capital. Lenders are leaning into fundamentals, borrowers are recalibrating expectations, and the firms that blend speed with sound structure are separating themselves from the pack. As 2026 approaches, expect tighter underwriting, more creative capital solutions and deeper collaboration between lenders, sponsors and borrowers. The market may be selective, but it is far from stalled. For lenders who stay consistent, communicate clearly and hold to their credit culture, this cycle offers as much opportunity as challenge — and the next phase of growth will belong to those who get that balance right.
