When not to Fund: Why We Prioritize Discipline Over Deals
This week’s blog draws on themes we recently shared in our investor newsletter — a message we believe is worth reinforcing more broadly. Whether you’re reading this as part of our regular blog series or saw a similar message in your inbox earlier this month, the principles behind it are central to how we think about risk, structure, and long-term capital protection.
In private credit, success isn’t just measured by the deals we fund but by the ones we walk away from.
At Garrington, rigorous underwriting is the cornerstone of protecting investor capital, and sometimes that means saying no, even when the opportunity looks appealing at first glance.
While many of our transactions are straightforward — involving verifiable invoicing, clear shipping documentation, purchase orders, and third-party confirmations — the reality is that even simple deals can unravel over seemingly minor issues. This is why our team leaves no detail unchecked.
Recent examples illustrate the importance of our approach:
Refusal to Sign a Notice of Assignment:
Everything looked textbook when we started diligence on a new distribution company earlier this year.
Strong customer list. Clean invoices. Verified shipping documentation. Purchase orders matched perfectly.
It was the kind of deal that typically sails through underwriting. Investment Committee approval came quickly. We moved to the final legal documents. And then — a red flag.
The client refused to sign the Notice of Assignment, which directs customer payments to our lockbox. No Notice, no control over cash flow. Without that, the foundation of the transaction crumbled.
We could have pushed forward, rationalized the risk, or “trusted” the relationship.
We didn’t. We declined.
Our takeaway: Even after approval, we remain vigilant until the last signature is secured.
The Buyout Agreement that Risked Subordination:
Another promising opportunity with a transportation company stumbled during the legal review. The client’s previous factor included problematic language in the buyout agreement, exposing us (and the client) to future claims. We paused the transaction when the outgoing lender refused to amend the terms.
Our takeaway: We never compromise on first-position security.
Unexpected Objections to Standard Default Protections:
In another case, a transportation broker declined to proceed after objecting to industry-standard default fees included in our legal documents. While these fees are rarely triggered, they are essential to protect against borrower misconduct.
Our takeaway: Our legal protections are non-negotiable — they’re designed to safeguard client and investor interests.
At Garrington, we operate with a simple philosophy:
We win by not losing.
Protecting principal is our first and most important priority.
Our underwriting team brings technical expertise and a commitment to transparency and consistency, even when it means difficult conversations or walking away from revenue. We recognize that each deal we decline protects the portfolio’s stability and supports the long-term trust of our investors.
And importantly, we believe that leaving a door open — with honesty and respect — often leads to opportunities down the road. Some of today’s “no’s” will become tomorrow’s valued clients, better aligned with our disciplined approach.
