Private Credit: Myth vs. Fact in LMM

The rise of private credit has fundamentally altered the capital structure of modern leveraged buyouts. However, in the lower-middle-market (LMM) technology space, persistent myths obscure the reality of how these deals are financed.

Myth: Private Credit is Too Expensive for LMM Tech

While nominal rates may appear higher than traditional syndicated loans, the structural flexibility offered by private credit funds—such as PIK (Payment-in-Kind) toggles and relaxed covenants—often provides the exact breathing room a newly acquired technology platform needs to execute an aggressive growth or roll-up strategy.

When a B2B SaaS company requires significant upfront investment to restructure its go-to-market motion, traditional bank covenants based on strict quarterly EBITDA targets can be suffocating. Private credit understands the J-curve of software restructuring and prices the risk appropriately.

Fact: Speed and Certainty of Close

In proprietary, off-market transactions, certainty of close is paramount. Founders who bypass the auction process expect discretion and speed. Private credit providers can underwrite and commit capital exponentially faster than traditional banks, making them the preferred financing partner for private equity firms and their retained institutional buyers.

"The premium paid for private credit is not just for capital; it is a premium paid for agility, certainty, and structural alignment."

We anticipate that private credit will account for over 85% of acquisition financing in the sub-$100M enterprise value technology segment over the next 24 months, permanently displacing traditional commercial bank debt in this sector.