Founder-Led Companies Private Credit Use Cases

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This article is Part 2 of last week’s post on how founder-led companies are reshaping their capital options. If you missed Part 1, it introduced the rise of non-sponsor private credit and why more founders are exploring alternatives to banks or equity sales.

In this second installment, we turn to the practical side: how founder-led companies actually use private credit, and what the data really says about common misconceptions.

This isn’t theoretical. The same patterns keep showing up: private credit is increasingly used by lower-middle market companies to fund acquisitions, expansions, buyouts and recapitalizations.¹ According to the Small Business Investor Alliance (SBIA), the Lower Middle Market (LMM) consists of companies with annual revenues between $5 million and $150 million.²

In practice, this translates into repeatable, use-case driven demand — with private credit increasingly serving as the preferred capital solution across core lower middle market transaction types.

• Strategic acquisitions. Private credit offers flexibility that traditional bank loans often lack — particularly when the deal involves forward-looking synergies or integration risk.³

• Market or capacity expansion. Whether opening a new facility, adding geography, or investing in sales infrastructure — private credit terms can be tailored to match investment horizons better than typical bank lines.⁴

• Partner or shareholder buyouts. Legacy partners or shareholders may require liquidity or retirement capital. Private credit enables an orderly buyout without needing a new equity partner.⁵

• Recapitalizations or de-risking. Some founders want to extract personal equity, manage personal exposure, or tidy up the cap table — without giving up control. Private credit enables that path in a controlled, structured way.⁶

  
  

In all these inflection points, private credit provides what banks often can’t: flexibility, speed, and structure tailored to real-world business dynamics. At Axis Group Ventures, we’ve executed non-sponsored private debt across working capital and asset-based financings, as well as growth capital for SaaS and other recurring-revenue businesses where bank underwriting falls short.

Source: Aparti Capital, EPOCH Financial, White Wolf Capital,  National Association of Insurance Commissioners (NAIC)

Common Misconceptions (and What the Data Really Says)

Founders in this segment tend to share a few beliefs:

1. “This type of debt is only for PE-backed deals. ”The sponsor-backed market is still large, but non-sponsored lending is now a deliberate focus area for many managers. Industry publications explicitly highlight non-sponsor deals as a growing share of private credit activity as PE fundraising slows.⁷

2. “Lenders won’t look at companies our size.” Direct lending strategies are designed around middle-market, non-investment-grade borrowers. Many funds specifically target the lower middle market because competition is lower and yields are higher.⁴

3. “If I use debt, I’ll eventually lose control anyway. ”The real control risk for founders usually comes from cumulative equity dilution and governance shifts—not from well-structured debt. Multiple studies show founder ownership commonly drops 15–25% per round in growth equity scenarios, with each round shifting voting control and board dynamics away from the founder.⁸ Thoughtful founders are using debt precisely to avoid raising equity at the wrong time or on the wrong terms.

4. “If it’s not a bank loan, it must be aggressive.” Private credit is priced for risk and flexibility, but the risk profile is not inherently “loan-shark.” These are institutional investors, often managing pension or insurance capital, operating in a regulated environment with increasing attention from central banks and global bodies.⁹

   
   

The evidence points to this: the market has professionalized faster than the founder narrative has updated. The gap is informational, not structural.

The Bigger Picture for Lower Middle-Market Founders

Zoom out, and a few structural dynamics become clear:

• Institutional private credit is now a core pillar of global financing markets — growing rapidly and offering a broad alternative to bank reliance.¹¹

• Traditional banks remain important, but in the lower middle market they tend to be more conservative on leverage, offer limited or no interest-only periods, and are often less flexible when proceeds are used for liquidity events — constraining their usefulness for growth capital or structurally complex transactions.¹²

• Many founder-led companies are cash-flowing, profitable, and operationally sound — yet they increasingly face growth opportunities or structural transitions (acquisitions, buyouts, recapitalizations) where bank debt doesn’t fit and equity feels too expensive or dilutive.

• Non-sponsor private credit offers a viable third path: flexible capital that can include structured equity participation, while allowing founders to retain operational control and strategic discretion. 

  
  

For founders, the takeaway is simple: you’re no longer limited to “bank or equity.” There’s a third way — one that balances control, growth, and optionality. As awareness spreads, we can expect more founder-led firms to quietly but meaningfully reshape their capital stack.

If you’re exploring options around private market secondaries or private debt—and want to understand how these tools fit into founder-owned businesses—we’re always open to a conversation.

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. Corporate Finance Institute, “What Is Private Credit?”, Corporate Finance Institute, [https://corporatefinanceinstitute.com/resources/capital_markets/what-is-private-credit/?utm_].

2. Small Business Investor Alliance (SBIA), “What Is SBIA?,” SBIA, [https://sbia.org/what-is-sbia/#:~:text=Middle%20market%20firms%20break%20into,1%20billion%2Fannual%20revenues]

3. Aparti Capital, “Private Credit & Mezzanine Debt in Business Acquisitions: The Quiet Power Behind the Deal,” Aparti Capital, October 10, 2025.

4. EPOCH Financial, “Private Credit Lending: Growth with Non-Bank Capital,” EPOCH Financial, May 6, 2025. 

5.  White Wolf Capital, “Private Credit,” White Wolf Capital, web page. 

6.  National Association of Insurance Commissioners (NAIC), Capital Markets Primer: Private Credit, report, 2024. 

7. McKinsey & Company, “The Next Era of Private Credit,” McKinsey & Company, September 24, 2024.

8. M Accelerator, “How Dilution Impacts Founder Equity,” M Accelerator Blog, 2025.

9. Federal Reserve Board, “Bank Lending to Private Credit: Size, Characteristics, and Financial Stability Implications,” FEDS Notes, May 23, 2025. 

10. ABF Journal, “The Migration of Direct Lending Down Market: How Sub-$50M EBITDA Companies Are Accessing Private Credit,” ABF Journal, 2025

11. Bank for International Settlements (BIS), “The Global Drivers of Private Credit,” BIS Quarterly Review, March 2025. 

12.  PwC, “Private Credit: A Growing Force in the Financing Markets,” PwC Financial Services Insights, 2024.

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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.