Which companies fall through?
Companies that cannot get a bank loan are able to get alternative credit, which is filled by ordinary businesses instead of failing ones. It needs several years of steady earnings, collateral that can be valued without a site visit, and steady revenue. Businesses in transition will miss all three at once and still be fine. Third Eye Capital describes the companies it finances as businesses changing or in special situations, which is a plain way of naming that space from the inside.
The firm’s background explains why it looks there. The founder started and ran companies before setting up as a lender, and the firm says its wider team shares that experience. From inside a bank, the gap looks like a pile of declined applications. From the owner’s side it looks like a good company with nobody to call, and a lender who has sat on that side of the desk tends to spot the difference quickly.
Reasons banks step back
Certain borrowers are stepped back from by banks because of their regulatory and funding structures, and that has nothing to do with their judgment. Banks are forced to carry unusual loans on account of higher capital requirements, so credit committees look for loans with low carrying costs. Companies whose value is derived from contracts, receivables, or intellectual property are able to expand their operational bases while their borrowing base shrinks.
The clock does the rest. A facility of any size can sit inside a bank’s process for three months or more, and a company with a supplier deadline or a purchase about to close cannot wait for an answer that may not come. When a borrower has a bad quarter, the bank’s reflex is to cut exposure rather than stay and work through it. This is not bad faith. It is what a bank is built to do, and it leaves the same kinds of companies unserved year after year.
Inside the lender’s team
A lender’s published team structure shows one concrete example of how they fill the gap by doing the work a bank might skip. The legal and restructuring functions sit alongside the investment and accounting functions. Lenders staff that position only if they expect to be in the room when portfolio companies run into trouble, and that impacts how loans are written.
With restructuring expertise in the building, a tangled situation can be read for what can be fixed, rather than only for what might go wrong. Repayment follows how the company actually earns. Covenants follow the plan instead of a standard form. The firm also points to resources and relationships across many industries as part of what it offers, and for a management team facing something new, that can matter more than the credit line.
Holding to the outcome
It emphasises that volume is not as effective as conviction and expertise. When lenders only want to deploy capital, they lean toward borrowers who had never run out of options.
- A lender aiming at one outcome for one company accepts a slower underwriting process in exchange for a loan that fits.
- Staying close after closing lets the lender see a problem forming before the numbers report it.
- Because the lender is paid for the difficulty, a first bad quarter is a reason to adjust, not a reason to leave.
- Once the company can borrow on ordinary terms again, the alternative lender’s job is finished.
The gaps in traditional lending are the outline of the banking model itself, and alternative credit exists because a particular kind of lender decided those gaps were worth standing in.
