Outlook for business financing unlikely to improve, says GCI

The financing environment will remain challenging for mid-market businesses this year due to economic conditions and high interest rates, according to Global Credit Investments (GCI) managing director Hugh Selleck.

However, the outlook would likely vary across different sectors, Selleck explained.

"Retail and construction will continue to be sectors under pressure, however, it’s clear that household cash is tight, and this obviously has broader implications," he said.

While some businesses would struggle to access finance from traditional lenders such as banks, private credit providers would help fill some of the gap with the inflow of investor funds to private credit still strong, Selleck said.

"Banks typically have very strict lending parameters and don’t venture outside those."

"Non-bank financiers bring a different set of skills to borrower situations and can tailor a loan to meet the more complex or challenging borrower requirements."

GCI has seen strong investor support for its own capital fund, raising $100 million for its Strategic Capital Fund in early December.

The recently launched fund provides financing solutions to mid-sized Australian and New Zealand businesses to facilitate growth, turnaround, and restructuring initiatives.

The fund looks at transactions in the $5-50 million range and aims to execute transactions faster through its committed funding structure.

With banks becoming increasingly aware of private credit providers, Selleck said banks were becoming more competitive with pricing for loans, particularly where the customer is incumbent to the bank.

However, private credit providers could often still offer more flexible loan terms in relation to covenants, terms and leverage, he added.

Selleck said in the current market, mid-market businesses needed access to rapid, customised financing solutions.

"If a mid-market business has limited access to financing, they may miss out on opportunities, such as expanding into new markets, acquiring a strategic asset, or investing in innovations that could give them a competitive edge."