Private credit provides support for businesses with complex needs by putting a price on complication instead of ignoring it. It doesn’t work that way in most cases. This bank’s model was designed for a company with predictable revenue and smooth cash flow, which plenty of perfectly good companies don’t have. Third Eye Capital was founded by two founders who had hit a wall from different sides, one raising funds for his own company and the other investing in good firms that were turned down. The firm still describes its borrowers as mid-market and smaller companies the large institutions had labelled too risky, and the founders’ view from the beginning was that these cases were far more common than anyone at a bank would admit.
- A business paid in three or four big instalments a year, rather than monthly, looks erratic on a spreadsheet even when every contract behind the payments is solid.
- A company whose value sits in intellectual property, with hardly any buildings or machinery, has collateral a bank cannot value, and the meeting usually ends there.
- A firm with one bad year from a project that failed, and a workable plan to get past it, gets filed as a risk instead of a borrower with an explanation.
- A company growing faster than its working capital can support looks stretched at exactly the point it is doing well.
Is flexibility important?
Flexibility matters because a complicated business will not fit into a standard loan, and forcing it to creates problems that were not there before the money came in. The interview put it in terms of suits. A bank sells off the rack, cut to fit as many customers as possible. Private debt measures the client first and cuts afterwards.
What that looks like in practice is fairly plain. Repayments follow the real cash pattern of the business, which for a seasonal operator removes the monthly squeeze that pushes people into bad decisions. Covenants are written for the company at the table, so nobody trips over a ratio that never applied to how it earns. Interest can be shaped for the stage the firm has reached. The interview also said the capital was meant to come with advice drawn from the firm’s own turnaround and restructuring work, and for a management team facing something new, that advice is often the part they remember.
Taking the deal seriously
A private lender can absorb complexity because it has arranged itself to do the work a bank will not do. The interview was blunt about this. Banks operate under capital rules and risk limits that discourage deep due diligence on a difficult borrower, whereas a private credit firm has built its business around that diligence and is comfortable around stress and distress.
So the complex company gets the attention it deserves. Lenders visit the site, read contracts, understand why the numbers look odd, and design a facility around what was found.
Some of the firms the company backed were near failure or stuck, but a few grew past their old sizes. Complex situations don’t resolve with a loan. It is easier for a lender to adjust the facility while there is still room for adjustment if they know the business well. Usually, the same lender will fund the next stage of the company once it has stabilised.
