In 2024, middle market lending experienced a dynamic year, shaped by shifting economic conditions and evolving borrower priorities. Rising interest rates influenced loan structures, with lenders focusing on fixed-rate instruments and stricter covenants to mitigate risk. Borrowers emphasized flexible capital solutions, leading to increased demand for unitranche financing and hybrid debt structures. Private credit providers gained market share, stepping in as traditional banks tightened underwriting standards. Sectors like healthcare, technology and energy remained attractive for lenders due to strong growth potential and resilient cash flows. ESG factors increasingly impacted lending decisions, with sustainable financing options gaining traction. Despite macroeconomic headwinds, lenders adapted with innovative approaches, ensuring the middle market continued to access vital capital for growth and expansion.
Deal Spotlight: SLR Capital
- Category: Middle Market
- Deal Size: $50MM
- Lender: SLR Capital Partners
- Borrower: Freelance Contracting Platform
SLR Capital Partners $50MM ABL Deal for Freelance Contracting Platform
SLR Capital Partners demonstrated agility and expertise in December 2023 by executing a $50 million accounts receivable borrowing base-driven facility to support a freelance contracting platform facing year-end financing challenges. The company’s 2023 negative net income risked regulatory issues for its existing $135 million cash flow credit facility with two domestic money center banks. Leveraging its deep relationships with these banks and a seasoned ABL team, SLR stepped in to provide a timely and innovative solution.
“This investment highlights our ability to act decisively and deliver creative financing solutions under tight deadlines,” Cedric Henley, partner and co-chief risk officer at SLR Capital Partners, said. “We worked closely with the borrower and the referring banks to ensure a smooth transition to an ABL structure that met all parties’ needs while adhering to a strict timeline.”
The transaction, underwritten and closed in less than 45 days, showcased SLR’s ability to efficiently structure asset-based lending solutions. SLR’s focus on ensuring the borrower could provide consistent, accurate reporting of working capital, coupled with rapid verification of accounts receivable from major clients like Pfizer and Pepsi, was instrumental in the deal’s success.
In mid-2024, following a return to profitability, the borrower refinanced the facility with a lower-cost option. SLR achieved a healthy asset-level IRR, bolstered by call protection, upfront fees and disciplined execution.
“This deal also underscores the growing trend of banks seeking ABL solutions for borrowers with strong working capital but complex income statements,” Henley added. “Our expertise and strong relationships make SLR the preferred partner for these scenarios.”
