Stressed and Distressed Markets: Opportunities Amid Economic Uncertainty

When it comes to private credit, the U.S. lower middle market offers a significant yet often overlooked opportunity. Here’s why this segment is so compelling for lenders and investors alike.

What Is Middle Market Lending?

Lower middle market lending typically focuses on U.S. companies with $5 million to $50 million in EBITDA. These are established businesses, often with hundreds of millions in revenue, but they aren’t large enough to attract the attention of major Wall Street lenders.

This creates a unique gap in the market. Larger Wall Street players need to make loans in the $500 million to $1 billion range to move the needle, leaving a significant opportunity for lenders operating at the $30 million to $50 million level.

Why the Lower Middle Market Stands Out

The lower middle market benefits from a favourable supply and demand dynamic. There are fewer lenders competing, which means less pressure on yields. Unlike larger loan deals, which often come with covenant-light loans and higher leverage, these smaller more tailored loans often allow for higher yields and more downside protection.

At Steepe & Co., we prioritize loans secured by specific, tangible hard assets—assets we can evaluate and trust. This approach minimizes risk while delivering consistent returns.

The Supply and Demand Imbalance

Supply and demand are fundamental forces in any market, and private credit is no exception. In the U.S. lower middle market, there’s a significant imbalance: high demand for loans but limited supply of lenders who can operate effectively at this level. This imbalance creates a niche with higher rewards and manageable risks.

A Rewarding Path Forward

The U.S. lower middle market isn’t just another segment of private credit—it’s where smart investors can gain a real edge. Whether you’re an advisor or investor, understanding this space can unlock consistent, long-term returns.

If you’re ready to explore the potential of middle market lending, connect with us at Steepe & Co. Let’s discuss how this approach can work for your portfolio.