Commercial SME Finance
When we talk about private credit, much of the focus is on the direct borrowers — the manufacturers, distributors, and service providers that make up the backbone of North America’s real economy. However, the chain has another vital link: the lenders that serve these businesses.
Welcome to Part 3 of our Lending Series: Commercial SME Finance. In this vertical, we don’t just lend to businesses—we lend to lenders who finance small and mid-sized enterprises (SMEs). This might sound like a layer removed, but in practice, it’s one of the most efficient ways to deploy capital securely while supporting economic growth where it matters most.
What is Commercial SME Finance?
At its core, this strategy provides revolving lines of credit to experienced commercial finance companies—firms that already serve the SME segment through solutions like factoring, purchase order finance, and asset-based loans. These operators use our funding to power their own lending programs, creating a multiplier effect in the credit ecosystem.
Our loans are typically first lien, structured with robust protections, including:
- Up to 80% LTV on eligible loans (eligible loans are underpinned with both borrower’s first loss capital and with tangible assets creating an effective advance rate for us targeting 50-70%).
- Dominion of cash, giving us visibility and control over collections.
- Minimum borrower tangible net worth requirements, ensuring borrowers have real financial skin in the game
We underwrite these deals the same way we would any senior secured loan: collateral first, then structure, then sponsor. In this vertical, we’re working with seasoned operators—people with a track record of responsible lending and risk management and the infrastructure to match.
Why It Matters
Traditional banks frequently fail to meet the needs of SMEs, yet this sector is where innovation, job creation, and regional growth often begin. By financing lenders who specialize in this space, we indirectly support thousands of businesses across North America—all while staying senior in the capital stack and secured by short-dated, self-liquidating assets.
Decades in the Making: Why This Lending Strategy Still Inspires Me
When I began my career at a large North American commercial finance firm over 25 years ago, I hadn’t yet realized the unique opportunity that existed in lending to other lenders. That perspective changed when I was introduced to our client at the time — Liquid Capital. It was then that I saw the power of enabling like-minded operators to do what we, collectively, do best: support the growth of small and mid-sized businesses through responsible, asset-backed lending.
Today, Liquid Capital Corp is a wholly owned subsidiary of Garrington Capital, and our long-standing relationship continues to reflect the strength of this model. What started as a single lending relationship evolved into a broader strategy that now includes a network of factoring, ABL, and PO finance companies across North America.
Our clients benefit not just from access to credit but also from our decades of underwriting experience, risk management, and borrower behavior. These partnerships often become two-way streets. We refer deals that align better with their lending profiles, and they send us larger or more complex opportunities that fit our structure and underwriting expertise.
For me, this isn’t just a niche strategy. It’s a space I remain passionate about because we’re empowering the right lenders to serve real businesses while delivering strong, secured returns for our investors.
The Lending Relationships We’ve Built
Over the years, our Commercial SME Finance portfolio has included a diverse and growing roster of specialty lenders — each bringing something unique to the table, but all operating with tangible asset-backed strategies. Examples include:
- A purchase order finance and factoring company
- A combined factoring and asset-based lending firm
- An equipment leasing company
- A commercial mortgage lender
- Factoring franchises, including Liquid Capital
This extensive experience has provided us with a profound understanding of how these models function, a robust network of referral relationships, and collaborative deal flow throughout the alternative lending landscape.
Why We’re Good at It
Members of our management team have been in the alternative lending space for over two decades. We understand what it takes to run a successful lending platform because we’ve built and scaled several of our own. This experience gives us a unique edge: we can look at a borrower’s loan book and know, almost instinctively, where the risks lie and where the opportunity lives.
It’s not just about balance sheets and borrowing bases. It’s about track records, discipline, and understanding how real businesses operate. That’s what makes this vertical work. And that’s why investors who trust us with their capital know it’s in good hands.
