The Power of Relationship Lending in Private Credit
Great lending is not about choosing between relationships and numbers but mastering both.
In today’s world, financing decisions are often made by algorithms and rigid models that leave little room for nuance. While we embrace data and rigorous underwriting, we also know that lending is more than just a formula—it’s about understanding the full picture. Numbers tell us where a business has been; relationships help us assess where it’s going.
Every decision we make is backed by data, strong collateral structures, and sound risk management. But we also know that risk isn’t static—it evolves, and the best way to manage risk is through transparency and early intervention. That’s why we take the time to build relationships—because they foster better information, better decisions, and, ultimately, better outcomes.
Recently, we conducted a deep dive into invoice factoring, breaking down how we structure deals to optimize working capital solutions. Before we introduce our next funding strategy, we want to highlight the foundation that makes all of our lending solutions effective: a disciplined approach to risk management enhanced by strong borrower relationships.
Case Study: Bridging Growth Through Smart Structuring
A recent transaction we structured for a long-time client in the skilled trades sector is a perfect example of how we combine relationship lending with rigorous risk management.
This client, a staffing agency specializing in providing skilled workers to the mining industry in Quebec, had already been using our factoring solutions to manage cash flow. When an opportunity arose to acquire a complementary business, they needed a bridge facility to complete the deal.
Rather than relying on a rigid, one-size-fits-all lending model, we leveraged our existing relationship with the client to structure a $3 million senior secured facility that worked for both sides.
Here’s how we balanced flexibility with risk management:
- Strategic Collateral – Instead of financing the deal based on cash flow alone, we structured the facility using both the existing company’s assets and those of the target acquisition. This created a stronger security package, allowing the client to execute their growth plan.
- Diverse Asset Security – The loan was backed by a mix of collateral, including:
- Low LTV, Strong Protection – With a Loan-to-Value (LTV) ratio of just 43%, this deal was well-structured to protect capital. A lower LTV means that even in a downside scenario, significant asset coverage enhances investor security.
- First-Lien Priority—As a first-lien lender, we ensured that our position was well-protected in case of financial distress, further mitigating risk for our investors.
- Performance-Based Confidence – Given the client’s strong historical performance and excellent risk rating, we were able to provide the financing they needed without taking unnecessary risk.
This transaction perfectly exemplifies how relationship lending doesn’t mean lending without discipline. Instead, our deep understanding of the client’s business allowed us to structure an innovative, risk-adjusted solution that worked for everyone.
Data-Driven Lending with a Human Edge
Our approach isn’t about being lenient or sentimental—it’s about being proactive. A financial statement provides a snapshot in time, but a conversation with a borrower offers context. When we engage with clients directly, we uncover risks earlier, solutions faster, and opportunities that spreadsheets alone might miss.
This isn’t just a feel-good strategy—it’s a fundamental advantage in private credit. The ability to identify challenges before they escalate, adjust terms when necessary, and work toward solutions improves loan performance. It reduces losses, enhances recoveries, and strengthens portfolio resilience.
Why This Matters to Investors
The best protection against downside risk in private credit isn’t just strong collateral—it’s real-time borrower engagement. Borrowers who trust their lenders communicate earlier and more openly.
That means:
- Faster visibility into financial challenges
- Greater flexibility in structuring solutions
- Lower default rates and better recoveries
We mitigate risk at every stage by combining disciplined underwriting with active borrower relationships. This isn’t relationship lending in the old-fashioned sense—it’s relationship-driven risk management.
A Smarter Approach to Lending
At Garrington, we take our responsibility as lenders seriously. Our clients rely on us for consistent funding so they can make payroll, invest in growth, and manage their businesses. We set clear expectations, structure transactions prudently, and actively monitor performance.
The result? A resilient, high-performing private credit portfolio that balances risk mitigation with real-world business needs.
At a time when many lenders are moving toward impersonal, automated financing, we are proving that relationship lending—when done right—isn’t just different—it’s better.
