Private equity (PE) lending has become a cornerstone of modern finance, bridging the gap between traditional bank financing and institutional capital markets. While multi-billion-dollar transactions often dominate headlines, a less visible but equally critical segment lies in the smaller to mid-market capital raise range of $5 million to $100 million. These transactions present complexities that differ markedly from large-scale deals, particularly in terms of structuring, investor appetite, compliance and execution.
“The mid-market is where the real economy operates, yet ironically, it’s where capital is often hardest to secure.” Managing Director, Private Credit Fund
1. The Nature of Private Equity Lending
Private equity lending, also known as private credit, refers to non-bank institutions providing debt capital to companies. This financing can take many forms, including senior secured and mezzanine lending, unitranche facilities that combine senior and subordinated debt, bridge financing for acquisitions or expansion, or hybrid instruments that incorporate warrants and equity participation.
The great advantage of private equity lending is its flexibility: it allows for bespoke solutions where traditional financing falls short. Yet in practice, smaller raises are far from simple. The level of customisation required, the relative transaction costs, and the challenges of aligning investor expectations mean that deals in the $5M–$100M range demand a degree of creativity and precision that can exceed what is required for much larger transactions.
“Private lenders thrive on complexity, but in smaller deals, complexity meets scale inefficiency and that’s the real challenge.” Senior Credit Strategist
2. Key Complexities in Smaller Capital Raises
One of the most significant barriers is investor appetite. Large institutions pension funds, sovereign wealth funds and insurance companies tend to favour bigger deals that allow them to deploy substantial amounts of capital efficiently. Writing a $200M cheque is administratively simpler than managing multiple $10M allocations, which leaves smaller transactions in a difficult space: too large for angel or early-stage investors, yet too small to meet institutional scale.
Even when investors are willing, the costs of due diligence are often disproportionate. Legal, compliance and structuring expenses are relatively fixed regardless of deal size. For a $10M transaction, these can consume a much larger share of the raise than they would in a $500M deal, making investors more cautious and borrowers more strained.
The question of creditworthiness compounds the issue. Companies in this range often lack the track record, collateral, or governance structures of larger enterprises. Concentrated revenue streams, limited diversification and higher volatility increase perceived risk, forcing lenders to seek stricter terms.
Structuring itself adds complexity. Large-scale transactions often rely on well-trodden structures like syndicated loans or leveraged buyouts. Mid-market raises, by contrast, frequently demand more innovative instruments convertible notes, mezzanine debt, or revenue-based financing, which require lengthier negotiations and bespoke covenants.
Finally, liquidity remains a constraint. Because there is no deep secondary market for these instruments, investors face limited exit opportunities. This restricts their flexibility and tends to make underwriting more conservative than it would be in larger, more liquid markets.
“Liquidity is oxygen for investors. In smaller deals, the oxygen is thinner, which is why lenders price the risk so heavily.” Head of Debt Markets, Investment Bank
3. Challenges for Borrowers in the $5M–$100M Range
Borrowers operating in this space face a fragmented and highly variable investor landscape. Capital may be available from family offices, boutique funds, or high-net-worth individuals, but each source comes with distinct expectations, compliance demands, and decision-making timelines. The lack of uniformity often complicates negotiations and slows execution.
The cost of capital is another significant hurdle. Because lenders perceive higher risks, interest rates are often set in the double digits and lenders may require extensive covenants, personal guarantees, or equity dilution in the form of warrants. What appears to be accessible capital can quickly become a heavy burden.
Regulatory and compliance challenges also loom large. Smaller firms frequently lack in-house legal and compliance teams, leaving them ill-equipped to navigate the rigorous know-your-customer (KYC), anti-money laundering (AML), tax structuring and cross-border regulations imposed by lenders.
Moreover, execution timelines tend to be drawn out. Without the polished infrastructure of larger deals and established advisory networks, mid-market raises are more vulnerable to delays from incomplete documentation, extended negotiations, and difficulties aligning lender and borrower expectations.
“For many entrepreneurs, raising $20 million is harder than raising $200 million. The scrutiny is the same, but the resources behind the raise are not.” Family Office Investor
4. Strategies to Overcome the Capital Raise Challenges
Despite these difficulties, there are strategies that can significantly improve the odds of a successful raise. One is careful targeting of the right capital sources. Family offices can be more flexible and take longer-term perspectives, boutique private credit funds specialise in mid-market lending and impact-focused or ESG-aligned investors are increasingly open to smaller-ticket transactions that deliver measurable outcomes.
Another strategy is to employ blended structures that combine equity and debt. This can reduce perceived risk for lenders while still supplying the growth capital needed. Revenue-based financing, convertible notes and hybrid instruments are increasingly common in this space.
Strong governance and transparency are also essential. Borrowers who can demonstrate board oversight, audited accounts, and reliable reporting procedures create more confidence in the eyes of investors, even where credit history is limited.
Syndication and club deals are another way forward. By pooling smaller investors into collective structures, the ticket size becomes more attractive and risk is spread more evenly, making transactions more feasible for all parties.
Finally, borrowers benefit greatly from engaging experienced advisors. Advisors not only connect companies with suitable investors but also streamline due diligence, manage compliance and ensure that structuring is handled with minimal friction.
“The difference between a failed raise and a successful one is often an advisor who knows how to navigate the mid-market maze.” Private Capital Consultant
Looking Ahead: The Mid-Market Financing Opportunity
The $5M–$100M capital raise segment has historically been underserved, but it represents the true growth engine of entrepreneurship and economic expansion. These raises fund scaling SMEs, niche real estate ventures, infrastructure development, renewable energy projects and family-owned businesses seeking institutional footing. A number of macro and structural forces are converging to create fertile ground for mid-market private equity lending to flourish.
Bank Retrenchment and the Rise of Private Credit
Since the financial crisis, regulatory frameworks such as Basel III and IV have restricted banks’ ability to lend to non-investment-grade borrowers. Mid-sized enterprises, once dependent on traditional bank credit, are increasingly turning to private lenders. Specialist funds and family offices are filling the void, offering greater flexibility and tailoring of structures. This shift is positioning private credit as the primary growth enabler for this segment.
Institutional Investors Diversifying Into Mid-Market Debt
While large institutions traditionally gravitate toward billion-dollar allocations, the saturation of mega-deals and the squeeze on returns are pushing them toward the mid-market. Here they find higher yields, shorter loan durations that assist liquidity management and potential upside through equity-linked instruments. As private credit matures as an asset class, institutional participation in mid-market raises is expected to accelerate, particularly through syndication and co-investment platforms.
Technological Platforms and the Democratisation of Capital
Fintech and digital innovation are reshaping the accessibility of capital. Online marketplaces now connect SMEs directly with credit pools, while blockchain-based tokenisation enables fractional ownership of debt instruments, reducing barriers to entry and increasing liquidity. Artificial intelligence is also streamlining due diligence and underwriting, driving down costs that have historically made smaller raises inefficient. Collectively, these tools are set to transform the mid-market into a more transparent and scalable environment.
The ESG and Impact Investing Tailwind
Mid-market enterprises often lead the way in renewable energy, sustainable agriculture, healthcare and affordable housing sectors that align directly with global ESG priorities. Development finance institutions and impact funds are increasingly deploying capital here, particularly in emerging markets where even a $10M–$50M transaction can create transformative impact. This alignment between borrower activity and investor mandates is drawing substantial new pools of capital into the space.
“Impact is measurable at this scale. A $25 million loan can change an entire sector in an emerging market.” Head of ESG Investments
Emerging Market Growth
The demand for mid-sized financing is most acute in regions such as Africa, Southeast Asia and Latin America. These economies are characterised by rapid urbanisation, infrastructure gaps and rising consumer demand. Yet many businesses remain too small to access global capital markets, while local banks remain constrained. International private credit funds and blended finance initiatives are stepping into this void, catalysing growth through mid-market lending.
Consolidation and Professionalisation
As the mid-market develops, greater standardisation and professionalisation are expected. Club-deal frameworks that pool multiple lenders are gaining traction, governance and reporting standards are improving and consolidation among smaller funds is creating more institutional-grade managers. This maturation reduces fragmentation, mitigates execution risk and makes the segment more attractive to previously hesitant investors.
The Strategic Opportunity
For investors and lenders, the mid-market represents a largely untapped yield opportunity with significant scope for innovation in structuring, technology and syndication. For borrowers, it presents the chance to bypass restrictive banking channels and engage directly with a diverse global network of private credit providers who can offer not only capital, but also strategic partnership, governance support and long-term alignment.
The trajectory suggests that the $5M–$100M range will not only grow but also professionalise, emerging as one of the most dynamic and rewarding segments in global private equity lending. Those who position themselves early, with specialised strategies and strong networks, will be best placed to capture its potential.
“At Bourgeon Ventures, we see ourselves as more than facilitators, we act as introducers of projects to funding, bridging entrepreneurs and investors in a space where traditional finance often falls short. The mid-market is where real innovation is born, and our role is to ensure that capital and opportunity meet effectively.” Funding Director, Bourgeon Ventures
Visual Framework: 6 Forces Shaping Mid-Market Financing
A useful way to conceptualise this evolution is through a visual hub-and-spoke model. At the centre sits the “Mid-Market Financing Opportunity ($5M–$100M).” Radiating outward are six defining forces: bank retrenchment, institutional diversification, technological innovation, ESG alignment, emerging market growth and consolidation. Together, these drivers form an interconnected ecosystem that explains why this segment is both increasingly attractive and still underpenetrated.
Conclusion
While large-scale private equity lending often commands the spotlight, it is the smaller capital raises of $5M–$100M that encapsulate some of the most complex and challenging dynamics in modern finance. Disproportionate transaction costs, investor bias and execution hurdles all combine to make this a difficult space to navigate. Yet the forces shaping its future suggest not decline but rapid evolution.
Borrowers who present themselves with transparency, strong governance and creativity, and lenders who innovate with blended and flexible capital structures, will together bridge the funding gap. In doing so, they will not only unlock growth opportunities for individual enterprises but also drive forward one of the most important and dynamic areas of private equity lending in the decade ahead.
At Bourgeon Ventures, we see our role not as brokers, but as strategic relationship architects facilitating introductions where capital and opportunity meet with mutual value.