Authored by Nathan Brooks (Investment Analyst) & Hugh Selleck (Managing Director)
“In-between” is a phrase we are seeing and hearing more from borrowers, advisers, and finance brokers across Australia and New Zealand. It is not a term you will find in a bank’s credit manual, but it describes a situation that is becoming increasingly common in the current lending environment.
In simple terms, an “In-betweener” is a business that does not fit neatly into a bank’s lending criteria but is far from distressed. These are sound, operating businesses, commonly with real assets, diverse revenue streams, and high-calibre management teams. The problem is not the business model, but is instead the capital structure around it, and the environment it was built for.
Over the last five years, businesses were financed under conditions that no longer exist. Rates were low, liquidity was abundant, and lenders structured debt on the assumption that growth would continue. Today, funding costs are higher, business margins are tighter, and bank risk appetite has changed. The result is a growing number of businesses finding themselves pushed to the edge of their banking relationships, not because they have failed, but because the goalposts have moved.
In our experience, “In-betweener” tends to mean one of two things.
The first, a business that is not quite ready for bank financing. Perhaps they are early in their journey, still building their track record or asset base that a bank needs to see before it will lend. These businesses are not uncreditworthy; they are simply just not there yet.
The second, an established business that has been a bank client for years and has recently found itself being managed out. A short-term earnings dip following an acquisition, a period of underperformance in an otherwise resilient business, or tightening internal mandates at the bank have made the relationship uncomfortable.
Both situations are more common than most people realise, and both are solvable. Being “In-between” is a temporary state, not a permanent one. For most shareholders and managers, a dilutive equity raise is not the answer to a short-term capital structure problem. These businesses need a capital partner that understand the difference and can bridge the gap without making a temporary problem permanent.
An on-ramp and an off-ramp
At GCI, we work with “In-betweeners” every day. Our plan from day one is to make ourselves redundant. We seek to provide short to medium term Transformational Credit solutions to crystalise the achievement of a business’s objectives, and then for that business to transition away from us. We think about our role in two ways.
For businesses that are not yet ready for bank financing, we act as an on-ramp. We provide the capital and the structure they need to get to a place where a conventional lender will back them. Our solution enables these operators to focus on proving their business, so they can graduate to a cheaper form of capital. We can do this by having more appropriate covenants that give the room for the business to grow. We can take a more commercial and nuanced look at the business and are not constrained by conventional lending ratios.
For businesses being pushed out of their banking relationships, we first act as an off-ramp. We refinance the incumbent lender and put in place a structure that gives management room to operate. From there, we work with the borrower as they stabilise and point them toward the on-ramp back to conventional financing.
In both cases, we are not trying to be a permanent fixture on the borrower’s balance sheet. We are trying to reset the capital structure so the business has time, flexibility, and a credible way forward.
Reset capital, not rescue capital
When we engage with an “In-betweener”, we are not providing rescue capital. We are providing reset capital. This distinction matters.
Rescue implies the business is in trouble. Reset implies the business has a sound foundation but needs its capital structure realigned to where it is today, not where it was assumed to be when the original bank debt was put in place.
In practice, a reset can take many forms:
- Extending maturities to provide operational runway and relief;
- Reshaping repayment schedules to align with cash flow generation;
- Consolidating multiple facilities into a single structure;
- Structuring interest payments to weather near-term cash constraints;
- Creating appropriate and flexible covenants to the situation;
- Pricing risk appropriately for the current environment; or
- Creating bespoke solutions that go beyond what the borrower originally came to us for.
Done well, a reset gives management the ability to focus on running the business rather than managing the lender. This alone can determine whether a business’s objectives are achieved.
In practice
In 2025, we were introduced to an Australian equipment-hire business that had found itself been flagged as high-risk by its Big Four bank. The business runs two asset-backed divisions with predictable, reoccurring revenue. It had come under pressure following a cross-border acquisition that tightened its covenants, combined with a period of underutilisation and broader market headwinds. To the bank, on paper, it looked like a problem. In practice, it was an “In-betweener” in need of an off-ramp.
Our Asset Backed team reviewed the situation first, but it quickly became clear that the Strategic Capital team was better placed to help given the flexibility the Strategic Capital mandate allows. We refinanced the incumbent lender and structured a solution around the company’s operating profile, including structured interest payments to ease short-term cash pressure.
Since then, the business has stabilised and delivered meaningful performance improvements. That outcome did not require rescue capital. It required the right structure at the right time.
Why GCI
GCI operates across Strategic Capital, Asset Backed Finance, and Real Estate Credit. Most private credit lenders have a single product. That distinction is important as it means we are not trying to fit every borrower into the same box. We can draw on different pools of capital with different risk profiles and team experience to build a structured solution that suits the borrower, rather than one that meets the lender’s mandate at the expense of the borrower.
Advisers and brokers play an important role in identifying “In-betweeners” early and finding a capital provider that can act quickly and understand complexity. In many cases, a business being managed out of a bank relationship still has strong fundamentals. The right conversation at the right time can mean the difference between a managed transition and a disorderly exit. If you are working with a client in that situation, we would welcome a conversation.
With the recent launch of Strategic Capital Fund 2, we have committed capital ready to invest. If your business or a client is finding that traditional financing is not available or no longer fits, we have options worth considering.
Contact GCI Funds
For businesses navigating a period of transition, the right capital partner can make the difference between constraint or progress. Contact the GCI team to discuss how Transformational Credit can reset your next phase.