Mid-market companies are facing an uncomfortable reality: debt structures put in place during the ultra-low interest rate years now seem increasingly unsustainable. With tariff uncertainty and shifting supply chains layered on top of that, along with higher operating costs, the financial strain is immense.
When these companies look to traditional banks for help, they’re increasingly told that their problems are too complex for their risk requirements. So not only is borrowing much more expensive, it’s also much harder to come by.
That’s where private credit can play a decisive role, according to CEO Arif Bhalwani of Third Eye Capital Corporation. “We’re in one of the most attractive environments for pri0vate credit that I’ve seen in over two decades,” said Bhalwani. The dire straits of the middle market, especially in Canada, have revealed the “structural fragility of balance sheets”.
With the Big 6 banks dominating the Canadian lending environment, strict capital rules place stubborn restrictions on working with businesses in a state of transition. Thus, there’s an urgent demand for firms like Third Eye Capital with experience in finding value where other lenders only see risk.
Private credit firms are designed to dive into the complexities to find the proper collateral for secured loans. They look for the underlying durability of businesses and frequently work directly with management teams to fine-tune business models across many different industries. They are not intended to displace traditional banks, but to form partnerships in structuring asset-backed loans.
“[Asset-based lending] underwrites what is, not what could be,” Bhalwani explained. ABL focuses on immediate liquidity tied to collateral value. Private credit, by contrast, has the flexibility to finance transformations, which, Bhalwani points out, effectively bridges the gap between imperfect balance sheets and strong potential for growth.
Bhalwani’s risk management checklist analyzes the “durability of the collateral base, real-time access to reporting, and strong intercreditor protections.” He insists on cure rights and the ability to buy out an ABL partner if circumstances require it. This insistence reflects a philosophy: private credit lenders must think like business owners, not just financiers. By embedding themselves in the company’s operations and aligning incentives, they can manage complexity without overexposing themselves to downside risk.
Bhalwani expects deleveraging to continue across the mid-market, creating steady demand for creative financing. Companies saddled with debt at yesterday’s rates will need new structures to remain competitive. For private credit providers with experience in unconventional assets and distressed situations, the opportunity is outsized.
The middle market represents a third of private employment across North America. It’s in everyone’s interest to keep these vital businesses moving forward, and that will require financing options that can adapt to volatility, withstand higher borrowing costs, and respond quickly when conditions change.
For Bhalwani, that is where private credit proves its worth. By approaching each deal with an owner’s mindset, structuring around real assets, and demanding transparency, firms like Third Eye Capital Corporation can provide stability in an uncertain environment. Private credit is not about chasing yield, but about ensuring good businesses have the capital and the runway they need to grow stronger through cycles.