In today’s middle-market transactions, access to capital hasn’t disappeared, but what businesses are allowed to leverage has changed. These aren’t stories of growth for growth’s sake. They’re studies of structural alignment, of embedded capital that matches a company’s true architecture, of leverage drawn from what the business has already earned.

If recent market dynamics reveal anything about capital access, it’s that uncertainty has been reshaping the definition of leverage. Banks continue to lend, and traditional lenders remain active. But internally, stress tests and risk committees are recalibrating risk tolerance. That shift is driving tighter collateral thresholds on term loans and heightened utilization audits across existing credit lines, according to the Federal Reserve’s April 2025 Senior Loan Officer Opinion Survey on Bank Lending Practices.

For middle-market businesses, while access to capital through traditional channels remains available, many companies have lost access to their own leverage. That’s because businesses and lenders alike continue to conflate leverage with borrowing strength, framing it around familiar questions: “How many assets can be pledged?” and “What do the cash flow projections show?”

Real leverage can be illustrated by a combination of the 5Cs of capital readiness:

• Character: Beyond credit, what is the legacy, reputation, and leadership integrity of the business?
• Capacity: Can the business absorb added capital and convert it into yield now and over its next phase of growth?
• Cash Flow: Is there room for margin growth with predictability and performance reliability over time?
• Collateral: What’s pledged, what’s free, and what’s worth leveraging?
• Conditions: Is the use of funds clean and aligned with the evolving architecture of the cap stack?

The two cases below—The Test of Character and The Test of Capacity—illustrate what it looks like when capital is deployed for structural alignment rather than surface-level qualification. As traditional lenders narrow access and scrutinize performance through outdated models, these situations reveal how the 5Cs reveal what a growing business can rely on when its capital structure is tested under real uncertainty.

The Test of Character: Bridging Liquidity Loss with Reputational Leverage

Client: 55-year-old food and snack manufacturer
Challenge: Line of credit pulled after inventory devaluation
Key Leverage: Operational continuity, contractual predictability, legacy credibility, and supply chain trust
Capital Deployed: $5 million term loan to preserve operational continuity and maintain vendor reputation

A 55-year-old food and snack company with national operations had trusted vendor partnerships and a stable retail base up until 2025. That’s when a year-long value dip in their core commodity (nuts) led their senior lender to reclassify the company’s risk profile and pull its line of credit entirely, leaving them with no interim breathing space and no bridge capital for the upcoming slow winter cycle.

The company’s operations hadn’t changed. Their equity position remained stable. But with the value of their inventory marked down, their liquidity froze up right as vendor payments and seasonal costs came due.

Their investment banking (IB) partner was already working to secure a new senior lender, but board approval takes time. What the company needed most was an in-between solution—a junior position that preserved operations and trust without triggering further confusion or distress.

Their solution came in the form of $5 million in subordinated debt—not to fuel growth, but to meet obligations, protect reputation, and honor agreements with their farmers, distributors, drivers, retailers, and communities.

The underwrite accounted for:

• 55 years of supplier loyalty, especially among family-owned farms
• A consistent vendor payment record, even during past downturns
• A brand reputation that lined shelves at Costco and kept them stocked
• Clean use of funds, asset-backed collateral with projected recovery, and a clear capital plan through the IB partner

That $5 million became part of their interim capital plan. It gave the business time to finalize board approvals, for their IB partner to secure the senior facility, for them to unlock a deeper line of credit from their own ecosystem of farmers precisely because their reputation could carry true capital forward.

The Test of Capacity: Aligning Capital Structure to Operational Truth

Client: A diagnostic lab-testing service provider with $80 million annual revenue
Challenge: Business restructuring from facility-dependent model to in-home testing services
Key Leverage: Expanding services while maintaining operational profitability
Capital Deployed: $2 million term loan to restructure junior debt and stabilize cap stack with evolved business model

Many healthcare businesses are structurally vulnerable due to the complex landscape they operate in. Delayed insurance reimbursements, regulatory lags, and staffing costs create chronic cash flow strain. Access to liquidity often comes at a premium, and unless the business is building independence from the insurance payment cycle, it remains exposed.

A diagnostic company with $80 million in annual revenue had long operated on a facility-dependent model. That structure carried heavy operational weight: expensive machinery, onsite nursing staff, and delayed reimbursements from insurance providers burdened the business even as demand grew. On the surface, revenue suggested scale, but inside the operating cycle, profitability eroded with every rotation.

This financial doom loop persisted until two years ago, when the company engaged a private equity (PE) partner to restructure toward resilience. Together, they transitioned the model to include at-home testing services, capturing demand among seniors, homebound patients, immune-challenged individuals, and rural communities.

With this shift, the company saw measurable improvement: insurance payment timelines shortened, margins improved, and profitability became consistent for the first time in years. But while the business model had modernized, the capital stack remained stagnant. Their senior lender remained anchored to the company’s past risk profile, penalizing what was now a profitable, streamlined business with outdated short-term high-interest debt that chipped away at margin.

Having supported the restructuring within the junior layer for two years alongside their PE partner, I witnessed this inflection point firsthand. When the business reached the threshold for a full recapitalization, the IB sought subordinated debt to anchor the junior cap stack.

Subordinated debt capital served as the ‘“bridge-to-senior” solution, providing the stability the PE partner needed to replace the legacy facility. In coordination with the PE’s mandate, advisors structured a $2 million term loan to retire high-cost obligations, consolidating the junior layer and stabilizing the foundation for the new senior lender.

Performance-backed term loans structured without collateral requirements allowed the business to preserve its full asset base—so when presented to senior lenders, it stood structurally sound and strategically positioned to secure the most favorable terms.

That $2 million deployment became a linchpin in a larger restructuring—an alignment between past complexity and future capacity. The funding simply reflected what had already changed. And in that reflection, the cap stack began to mirror the business itself: lighter, steadier, and ready for what lay ahead.

Leverage Comes From Within the Business

When capital conditions tighten, a company’s access to its own leverage diminishes. Many are left scrambling, retrofitting narratives just to stay in play.

Capital is not made to impress or to be judged. At its best, capital reflects the structure of the business itself: what’s already built, what’s bearing weight, and what might crack under more.

Three questions worth asking about any business in your portfolio or pipeline:

• What’s already load-bearing?
• What strain is hiding beneath the story?
• What’s mature enough to press into?

When it comes to true leverage, the most resilient companies aren’t those that scale fastest or look largest, they’re the ones that have engineered the structural integrity to carry that weight as they grow.

Joe Camberato is the CEO and founder of National Business Capital, a private lender helping businesses secure the capital they need to grow, scale, and move faster. Since 2007, Joe and his team have completed thousands of transactions, helping companies access over $3 billion in funding. Today, they’re the market leader in $150K to $15 million transactions, working with businesses that need speed, flexibility, and a reliable partner.

ACG Insights is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.