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When Is It Time to Evaluate a New Lender?

  • Axis Group Ventures
  • Aug 5
  • 5 min read

I have worked in the credit markets since 2006, first as a bank and non-bank credit investor and, more recently, advising borrowers through Axis Group Ventures. Across venture debt, asset-based lending, recurring-revenue facilities, cash-flow loans, structured credit, and other private-credit transactions, I have seen lending relationships evolve through many stages of a company’s life.


Sometimes a refinancing is driven by financial pressure. Sometimes a company has simply outgrown its lender. In other cases, the lender’s personnel, strategy, risk appetite, or cost of capital has changed.


Lenders rarely announce that their conviction in a borrower has weakened. More often, the message appears in the decisions they are no longer willing—or able—to make. They may decline to increase a commitment, extend interest-only terms, approve an acquisition, reset a covenant, or renew a facility beyond a short period.


Borrowers should not wait for several warning signs to align. One unfavorable decision, or even an indication that one may be coming, is enough to justify evaluating alternative lenders. Going to market does not necessarily mean replacing the incumbent. It creates optionality while the borrower still has time, liquidity, and negotiating leverage.


When the Company’s Credit Profile Changes

A lender underwrites a company based on a particular operating plan, risk profile, and expected source of repayment. When that profile changes materially, the existing lender may reconsider its level of support.

Events that may justify evaluating alternatives include:

  • An unusual or material event changes the credit story. A major customer loss, regulatory issue, litigation matter, product setback, management departure, cyber incident, or unexpected liquidity need can materially alter the lender’s view. Lenders do not like surprises. Early communication and a credible remediation plan can be as important as the event itself.

  • The company materially misses its forecast. One missed month may be explainable. A significant or repeated miss to revenue, EBITDA, bookings, collections, or liquidity projections can weaken confidence in management’s forecast and repayment plan.

  • The company breaches a financial covenant. A covenant breach creates a formal decision point. A waiver may indicate continuing support, while higher pricing, tighter reporting, a required equity contribution, or a paydown may show that support has become conditional.

  • The borrower becomes overadvanced. In a formula-based ABL facility, declining eligible receivables or inventory can cause borrowings to exceed availability. The lender may require a paydown, impose additional reserves, or restrict advances—potentially creating pressure when liquidity is already constrained.

  • The company falls out of compliance in another way. Reporting failures, unauthorized debt, prohibited distributions, missed payments, or other defaults may cause the lender to shift from supporting growth to managing repayment or an exit.


Golub Capital describes maintenance covenants as early-warning and engagement mechanisms that allow lenders to intervene before a payment default. Its framework shows how a lender’s response can progress from monitoring to waivers, amendments, equity cures, forbearance, and ultimately remedies.¹ The response can therefore reveal as much as the covenant breach itself.


When the Existing Lender No Longer Fits

Not every refinancing reflects deteriorating performance. A healthy company may need a different credit partner because its business and capital requirements have evolved.

  • The company needs greater flexibility. The existing covenant package, amortization schedule, borrowing-base structure, or approval process may no longer fit the business. The appropriate solution may be a covenant-light facility, or simply covenants better aligned with the company’s operating model and expected volatility.

  • The company has outgrown the lender. The next facility may exceed the lender’s hold size, concentration limits, geographic reach, product capabilities, or ability to support future growth.

  • The company is pursuing acquisitions. An M&A strategy may require delayed-draw capacity, acquisition lines, flexible leverage tests, rapid approvals, and a lender prepared to evaluate multiple transactions.

  • The company raises new equity. A meaningful equity financing may strengthen liquidity, extend runway, and create an opportunity to replace the existing loan with a larger, less expensive, or more flexible facility.

  • The financing has become too expensive. As a borrower matures, improves profitability, or develops stronger collateral coverage, it may qualify for lower-cost capital. However, the cheapest loan is not always the best loan. Future capacity, covenant flexibility, execution certainty, industry knowledge, and responsiveness also matter.


When the Lender Changes

Sometimes the company has not changed, but the lender has.

  • Key members of the lending team leave. A strong relationship can weaken when the original deal sponsor, relationship manager, or portfolio manager departs. A new team may interpret the credit differently or have less institutional commitment to the relationship.

  • Regulation or institutional strategy changes. Bank regulations, portfolio concentrations, sector limits, funding costs, or changes in a private fund’s mandate can reduce lending appetite even when the borrower continues to perform.

  • The lender becomes slow or difficult to work with. Delayed responses, unclear approval authority, repeated information requests, or reluctance to discuss future capacity may indicate that the lender is managing its current exposure rather than underwriting the company’s next chapter.


How Lenders Say No Without Saying No

Non-renewal is the clearest signal, but it is rarely the first.


A lender may refuse to extend interest-only terms, increase its commitment, approve an acquisition, or modify amortization. It may agree to an amendment only after receiving a paydown, additional collateral, tighter covenants, higher pricing, or new equity capital.


A three- or six-month extension can provide genuine support if it includes defined conditions, an information process, and a credible path to a longer renewal. Without those elements, the lender may simply be giving the borrower time to refinance

.

Credit stress also frequently appears through modified terms before it produces a missed payment. Moody’s reported that approximately 65% of corporate defaults in 2025 involved distressed restructurings, including workouts, debt modifications, and other events imposing losses on investors, rather than hard defaults.²


One unfavorable decision may not prove that a lender wants to exit. But a borrower does not need that proof before evaluating alternatives.


Create Optionality Before It Becomes Necessary

Borrowers should begin renewal discussions well before maturity and ask directly whether the lender expects to maintain, increase, or reduce its exposure. They should request clear renewal conditions, approval requirements, and decision dates—and avoid relying solely on verbal support.


The best time to evaluate a new lender is before a covenant breach, over advance, maturity, or liquidity shortfall removes the company’s negotiating leverage.


A lender’s silence is rarely the best source of information. Its decisions are.


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.


References

¹ Golub Capital, “A Matter of Control: Covenants, Lender Vigilance and Managing for Outcomes in Direct Lending,” https://education.golubcapital.com/resource/a-matter-of-control-covenants-lender-vigilance-and-managing-for-outcomes-in-direct-lending/


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 herein 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.

This blog post was developed using Axis Group Ventures’ proprietary market knowledge, professional insights, and years of industry experience, supplemented by large language model technology to assist with drafting and editorial refinement.

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