Realizing transformative business opportunities often requires additional capital and navigating significant complexity. In Australia’s middle market, despite a well-established private equity ecosystem, the availability of debt capital to support transformational initiatives remains limited and restrictive. Both traditional banks and non-bank lenders face constraints, particularly within the $10 million to $50 million range, especially if property assets aren’t in the picture. Over the past five years, GCI has led a promising shift with private credit providers stepping in to bridge this gap. We specialize in addressing complex situations, offering tailored solutions that unlock capital to drive material business upside.
Unlike traditional lenders that often focus on specific types of collateral like property, receivables, or equipment, some private credit providers like GCI are evolving to construct dynamic “borrowing bases”. This approach evaluates various financial and physical assets, assigning varying degrees of credit to each, culminating in substantial leverage to support diverse business objectives and transformational initiatives.
We are constantly talking to middle-market businesses about how we can design solutions to meet their specific needs. Many come to us as they require credit that by its nature cannot be “cookie cutter”, as their specific circumstances cannot be underwritten with a simple box ticking exercise. As entrepreneurs and business owners ourselves we understand the requirement for flexible and inventive debt capital.
The following examples highlight how we’ve approached this at GCI:
Revitalizing a Debt Collection Business (AU$27 million)
In 2021, we facilitated the acquisition of a New Zealand-based debt collection business which specialised in acquiring non-performing debts from diverse issuers and collecting on them. Leveraging our team’s deep sector expertise, we analysed their portfolio, categorizing it into eight segments based on the operational processes that had previously been applied to each segment and in turn the historical and projected cash collections. This granular understanding enabled us to craft a facility that not only supported the initial acquisition but also sustained its subsequent expansion. After two years of successful management under new ownership, the business seamlessly transitioned back to traditional bank funding, significantly reducing long-term funding costs and massively increasing the value of the shareholders equity.
Empowering a Professional Services Firm (AU$30 million)
A prominent professional services firm, burdened by substantial debt from acquisitions, sought additional working capital. Despite past challenges, we provided a facility that not only accounted for receivables but also work in progress which was expected to be realised within the following twelve months. We were able to do this by mapping the workflows of the receivables and work in progress, including identifying the origination source of the receivable, and applying handicap scores to various receivable segments based on past and expected future performance. This liquidity infusion helped fund the firm’s turnaround strategy, eventually facilitating their acquisition by private equity.
Fuelling Innovation in Demonstration Plant Construction (AU$20 million)
One of our borrowers aimed to construct a pioneering demonstration plant, showcasing an environmentally sustainable method for producing critical minerals. With over $40 million invested historically, additional capital was needed to finalize the project and demonstrate its viability. Partnering with a specialized team experienced in lending against research and development tax refunds, we structured a facility that factored in property, plant, equipment and engineering services over a compressed time frame and with complex international logistics. The anticipated research and development tax credits generated during plant construction will provide a material amount of the necessary capital and significantly reduce the amount of very expensive equity capital that would have been required. The business is now planning the construction of a larger, commercial-scale plant.
Reviving a Private Equity-Owned Bakery Business (AU$8 million)
A private equity owned bakery business had faced operational challenges and needed a funder who could work with the owners as they executed on a well-articulated turnaround plan. Taking into account the re-marketability of much of their equipment, in addition to the high quality of their customers, we were able to provide a facility that gave credit to both their receivables and equipment to support the business. We partnered with both a specialist valuation firm and an invoice finance specialist to get to a speedy solution.
At GCI we see our role as “problem solvers” as opposed to “product pushers”. We have the flexibility to look at each business’s circumstances and come up with a solution that is tailored to the needs of the business as we see them. This unlocks the possibility for middle market borrowers to access capital to take advantage of transformational opportunities that they would otherwise have to forego or fund with expensive equity. The examples above are only select instances of this approach in action. If you would like to learn more, please reach out at www.gcifunds.com.
To read more about how we have helped a variety of businesses transform over the years, visit www.gcifunds.com/case-studies/
Authored by Henry Stewart (Managing Director)