Beyond the Banks: How Lower Middle Market Companies Access Private Credit Without PE Ownership

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Founder-led businesses in the lower middle market often find themselves in a tight spot. They need capital to grow, support working capital, acquisitions, capital equipment, and even shareholder dynamics (buyouts and liquidity events). However, business owners are often hesitant to give up ownership, or control, and funding options can be limited.

Survey data supports the strength of that ownership instinct. In a recent global study of family and founder-controlled businesses, in 83% of cases, family ownership remained at or above 70%, and only 3% planned to sell the business, even though many were approaching succession age.¹ Another survey of US private business owners found that 91% say it’s important that the business remain in the family for the next generation, and 45% cited “I identify too much with my business to give it up” as the main reason they wouldn’t sell in the next 1–2 years.²

With this profile ownership control imperative, Founders/owners in the lower middle market face a basic tension: they need capital to grow, but they want to retain control. That tension shows up clearly in national data from Goldman Sachs.

• According to Goldman Sachs “10,000 Small Businesses Voices” survey, over 75% of small business owners report concern about access to capital as banks tighten lending standards.³

• A separate national survey of more than 2,500 diverse U.S. small-business owners by U.S. Black Chambers, Inc.⁴ and related associations found that nearly half said they lacked confidence in their ability to cover an unplanned $5,000 expense — underscoring the fragility even among relatively modest firms.⁵

• And data from Consumer Financial Protection Bureau (CFPB)’s “Making Ends Meet” survey shows small-business owners face more income volatility and credit constraints than non-owners, even though many earn more on average.⁶

This suggests the problem isn’t just a shortage of capital. It’s a knowledge gap: many founders know the traditional tools (banks, internal cash, maybe equity), but they may not realize how much the capital markets have evolved, or how accessible institutional non-bank credit has become for standalone, founder-led firms.

What “Non-Sponsor” Private Credit Actually Means

Historically, direct lenders followed private equity. The sponsor brought governance and a thesis; the credit fund brought leverage. That model still exists—but it’s no longer the whole story.

For purposes of this article, non-sponsor private credit refers to situations wherein a lender works directly with an independently owned company—often founder- or family-owned—without a PE fund in between. Large managers now explicitly include non-sponsored lending as a core part of their opportunity set, targeting founder-owned or closely held businesses with stable cash flows.⁷ Non-sponsored deals are becoming more prevalent as lenders look beyond sponsor-backed transactions.⁸

What does that look like in practice?

• Imagine a founder-led services business with $30 M in revenue and consistent EBITDA margins. Its customer base is diversified, revenues recurring, and hard-asset collateral light.

• The founder wants to buy a smaller competitor, or wants some personal liquidity — but doesn’t want to give up control to a private equity sponsor.

• A non-sponsor lender can then provide a unitranche or senior + PIK facility sized based on cash flow rather than hard collateral, with covenants and reporting tailored to the company. The founder retains equity, board control, strategic decisions while the lender is compensated through the agreed debt terms.

  
  

Private lenders are increasingly willing to back professional, founder-managed companies directly without requiring a PE sponsor in the middle.

This is where Part 2 picks up—how founder-led companies are actually using private credit today, what misconceptions persist, and how the market is shifting beneath the surface.

Part 2 will be posted next week.

About Axis Group Ventures

Axis Group Ventures is a boutique investment banking and strategic advisory firm. We focus on global debt placement and private market secondaries for venture- and private equity-backed companies. Our firm partners with founders, CFOs, and investors to provide customized capital solutions in the private markets. We leverage deep experience in private credit and a global network of capital providers. Axis Group Ventures’ mission is to bring greater transparency and alignment to complex financing decisions through disciplined, independent advisory and high-touch execution. For more information, visit www.axisgroupventures.com.

Sources:

1. Barron’s, “Family-Owned Businesses Face Future Succession Crisis,” Barron’s, November 15, 2025.

2. Brown Brothers Harriman & Co., Second Annual Private Business Owner Survey, PDF report, October 1, 2024.

3. Goldman Sachs, “More Than 75 Percent of Surveyed Small Businesses Are Worried About Credit,” Goldman Sachs, May 16, 2023.

4. U.S. Black Chambers, Inc., “Survey of 2,500+ Diverse Small Business Owners Shows an Unexpected $5,000 Expense Could Jeopardize Nearly Half of Small Businesses,” U.S. Black Chambers, Inc., press release, May 19, 2022. 

5. MBN USA, “Survey: SMBs Lack Funds for Unplanned $5,000 Expense,” MBN USA, June 15, 2022.

6. Consumer Financial Protection Bureau (CFPB), The Financial Security of Small Business Owners: Evidence from the Making Ends Meet Survey, data-spotlight report, January 03, 2025.

7. Brookfield Oaktree, Understanding Private Credit: Sponsored vs. Non-Sponsored Financing, report, May 2023. 

8. Private Debt Investor, “Private credit deals: No sponsor? No problem,” June 2, 2025.

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Disclosures & Disclaimers

This blog post is provided by Axis Group Ventures for informational and educational purposes only. It does not constitute investment, legal, accounting, or tax advice, and should not be relied upon as such. Nothing contained here should be interpreted as an offer to buy or sell any securities. Any actual offer or solicitation will be made exclusively through formal documentation provided by the relevant issuer or seller.

Axis Group Ventures is not a registered broker-dealer and does not execute, negotiate, or recommend the purchase or sale of securities. Any introductions or private-market support provided by Axis Group Ventures are conducted strictly in an advisory and consulting capacity. Readers should conduct their own due diligence and consult qualified professionals before making any financial decisions.

Investments in private securities involve significant risks, including the potential loss of the entire investment, and are typically illiquid. Past performance does not guarantee future results.