Authored by Sunny Xu (Investment Analyst)
A flexible lender can be the difference between growth and gridlock
For growing non-bank lenders, access to scalable, flexible capital can be one of the keys to unlocking growth. While traditional warehouse facilities are appropriate for established finance companies, they can often be too rigid, complex, or costly for lenders that are still scaling. At GCI, we have seen how inflexible capital structures can limit a company’s trajectory – and conversely, how flexibility can be a catalyst for long-term growth.
As mid-market private credit investors, we have built our warehouse solutions for the real-world complexity and changing needs of emerging non-bank lenders. Being tailored, responsive and commercial underpins how we think about transformational credit – and flexibility is a core feature to the value we bring.
The Problem with Traditional Warehouse Facilities
Warehouse facilities designed for institutional investors don’t always serve the needs of growing lenders. They often involve:
- Syndicated funding with complex waterfall and cashflow mechanics;
- Long legal documentation suites, including multiple tranches and side letters;
- Strict loan eligibility criteria that reduce operational flexibility.
For non-bank lenders in the growth phase, these structures can be slow to set up, expensive to manage, and difficult to adjust as the business evolves.
Why Flexibility Matters
Business models, products, and target markets shift over time, especially for emerging lenders. A facility that works today may be restrictive in 12 months. We often say to emerging lenders: “as you set up a facility for the next 24 – 36 months, what you know for sure is that what you think you’ll be doing in 24 months will be different to what you’ll actually be doing in 24 months.”
Traditional warehouse structures assume stability and predictability. They are often rigid, with tightly defined parameters and little room for change. But growth isn’t linear, and funding shouldn’t be inflexible. That is why GCI designs its facilities with change in mind. We build in flexibility from day one, supporting your business without constraining it.
The GCI Difference: Simple, Flexible, Aligned
We structure unitranche warehouse facilities tailored to the needs of emerging non-bank lenders. These combine the mechanics of a warehouse (borrowing base, monitored drawdowns, pool-level security) with the simplicity and agility of a corporate facility.
This approach enables:
- Lower setup costs;
- Faster execution and drawdown;
- Structures that evolve as the business scales.
In addition, we perform detailed diligence not just to manage credit risk, but to truly understand the borrower’s business:
- We assess unit economics, pricing strategy, and operational structure;
- We review cashflow mechanics and capital stack objectives;
- We work collaboratively to design structures aligned with funding needs;
This commercial approach helps us find practical solutions to support evolving needs, and ensures that the facility is aligned with the business’ goals from day one. Ultimately our model is to partner with high quality originators who are aligned with us through first loss participation.
This means that when you come to us with an idea that you think is a sensible deviation from our initial parameters (and you are willing to back it with your skin in the game), our default position is that we should be supportive of it. That is the difference a flexible partner makes.
Flexibility in Practice: Case Studies from GCI
We’ve delivered bespoke, flexible warehouse solutions across a range of borrower types and asset classes. In our last decade at GCI, we’ve had countless scenarios and situations where we needed to be a flexible partner to our borrowers.
Unlocking an Urgent Growth Opportunity
- A Borrower had drawn $17 million of their $20 million Equipment Finance facility when they identified a new $6 million opportunity late on a Friday afternoon. The deal presented strong fundamentals but exceeded the warehouse’s maximum loan size of $1.5 million and would require an extension to the facility limit.
- Rather than allow structure to stand in the way of a good deal, GCI reviewed the opportunity that evening, approved the underlying loan by Saturday morning and arranged for amending the warehouse documents to accommodate the larger limit by Monday morning. This responsiveness allowed the Borrower to secure the transaction – a win driven by speed, flexibility, and a commercial mindset.
Sustained Flexibility Through Market Cycles
- Over the past four years, GCI has funded a Real Estate backed lender through a warehouse facility designed with auto-approval mechanics for loans within set parameters, and requiring lender manual approval for those outside.
- Countless manual approval requests have been submitted, often falling outside standard parameters but representing sound risk-adjusted opportunities. In nearly all cases, GCI responded within a matter of hours, approving the loan or providing clear feedback on areas of concern, which the Borrower has consistently appreciated.
- More recently, our Borrower found themselves holding excess cash due to a high volume of repayments. Rather than allow this capital to sit unused (and continue to accrue interest), GCI took the proactive step of offering to redeem their excess cash at no penalty and revised the pricing on future drawdowns to keep the borrower competitive in a tighter lending environment. This reduced the pressure on our Borrower to deploy capital in a sub-par manner, reset our Borrower for growth with a renewed competitive offering, and lowered the overall costs of the facility to them.
- Additionally, we temporarily waived certain portfolio parameters that would have been impacted by the shrinking borrowing base and continue to show flexibility where transactions make strong commercial sense, even if they sit outside original covenants. These examples illustrate how GCI can be a flexible funding partner through the credit cycle.
Preserving Momentum and Funding Optionality
- We recently established a warehouse facility with an SME non-bank lender, backed by a borrowing base of eligible receivables.
- Within the first month, the Borrower presented six ineligible loans that nonetheless aligned with the credit profile and economics of the portfolio. GCI approved all six manually, all within the hour, enabling the Borrower to maintain their pace of origination and avoid missing high-quality opportunities.
- Recognising the evolving nature of the portfolio, we also had structured a buy-out mechanism within the facility. This enables the Borrower to remove ineligible assets from the warehouse and finance them elsewhere, preserving optionality and control without adding structural friction.
Each warehouse facility was tailored and supported by a deep understanding of the borrower’s model, risk, and trajectory, but the real value add was our speed and flexibility in the situations our borrowers absolutely needed it.
Let’s Build Something That Works
We continue to see strong demand from non-bank lenders for scalable, flexible warehouse solutions. GCI remains well-capitalised and active in the market in the $10 million – $50 million space.
If you are seeking a funding partner that understands your business and builds fit-for-purpose credit solutions, we would welcome a conversation.