Featured Small Business Lending Article

Small Business Lending

Jeffrey Sweeney is an investment banker with years of experience in direct lending and corporate finance for small- to middle-market companies. He is the chairman and CEO of US Capital Partners, an innovator in small- to middle-market business lending. US Capital Partners has been providing prompt, innovative, and reliable financing solutions across the United States and abroad for more than a decade.

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Unitranche Financing for Small and Medium-Sized Businesses

Smaller enterprises are increasingly benefiting from US Capital Partners’ unitranche financing solutions, which offer the advantages of speed, simplicity, and certainty of closing.

Throughout the past year, US Capital Partners Inc. has continued to experience rising demand for unitranche loans (also known as “senior stretch”), which blend senior and junior or mezzanine debt into a single debt facility. Rather than approach a senior lender, typically a bank, and then also one or more additional junior lenders, borrowers with a unitranche structure have a single secured loan facility, in which all the debt is subject to the same terms. US Capital Partners has increasingly been providing such loans for its clients.

Unitranche Solutions for the Small and Lower Middle Market

First created in 2005, unitranche loans were used primarily for middle market transactions, by borrowers with annual EBITDA of up to $50 million and sales of up to $500 million. A deal size of about $100 million was fairly typical. Today, however, this hybrid loan structure is being increasingly used in the small and lower middle market, in place of traditional bank financing.

Advantages of Unitranche Financing

  • Simplicity. Unitranche structures have a single creditor agreement and single interest rate, and often also a single lender. This provides a streamlined process for ongoing administration and decision-making. Covenants become simpler to report and administer.
  • Reduced risk the deal will fall apart. With unitranche financing, there is no need for the borrower to mediate inter-creditor agreement negotiations between the senior and junior lenders.
  • Higher loan amounts. Risk is better mitigated if only one lender is involved. This can result in higher loan amounts because of the comfort of not having competing interests.
  • Speed. Unitranche facilities provide a faster way to borrow, because dealing with multiple lenders takes time, especially if the borrower is negotiating separate first and second lien facilities. This makes a unitranche solution especially suitable for financing acquisitions, for instance, where speed is often of utmost importance.
  • Savings. Unitranche loans can sometimes produce a lower cost of capital, because the entire loan amortizes over time, not just the senior debt as in a typical senior and mezzanine debt deal. With no competing interests between lenders, this type of financing also eliminates expensive legal posturing and duplicate default work with the borrower by competing legal counsel.

How US Capital Partners Can Help

The lending marketplace for smaller businesses continues to be highly fragmented. Specialty lenders are generally willing to lend only against their favored asset class. Finding the most appropriate mix of financing at the best cost, and then coordinating the different specialty lenders to a successful closing, can be a challenging process. In most cases, US Capital Partners has the ability to provide a single unitranche loan to vastly simplify the situation.

To learn more about how your business can secure the funding it needs, email Jeffrey Sweeney, Chairman and CEO, at or call (415) 889-1010.


US Capital Partners Launches Next-Generation Digital Investment Platform

Leading private investment bank for the lower middle market has rolled out a new, investor-centric online platform.

SAN FRANCISCO, FEBRUARY 2016 – US Capital Partners Inc. announced today that it has developed a digital investment platform. The new platform, available at, is being offered through US Capital Partners’ registered broker dealer subsidiary, US Capital Global Securities, Inc.

Headquartered in San Francisco, US Capital Partners is a private investment bank that makes direct debt investments, participates in debt facilities, and has robust distribution for debt and equity private placements for small and medium-sized businesses (SMBs). The firm’s creative and dynamic approach has helped it grow quickly into a leading investment bank in its sector.

Investment Platform

“We are delighted to have launched our digital investment platform,” said Jeffrey Sweeney, Chairman and CEO at US Capital Partners. “US Capital Partners originates or is presented with over $4 billion in potential funding opportunities each year. Through this new digital platform, investors will have access to a curated selection of private placement opportunities sourced from this large proprietary deal flow. The placements will be managed by our broker dealer, US Capital Global Securities, Inc.”

“This innovation in SMB financing is supported by the business-friendly Jobs Act directing the SEC to amend both Regulation A and Regulation D, which has led to new financial technology internet-based funding platforms. It has opened the doors for us to design and develop new proprietary technology-based tools for investors to more efficiently explore alternative investments and private placements,” said Charles Towle, Managing Partner at US Capital Partners and Division Head and licensed principal at US Capital Global Securities, Inc.

To learn more about US Capital Partners or its upcoming digital investment platform, email Jeffrey Sweeney, Chairman and CEO, at or call (415) 889-1010.


Stephen Diamond and Patrick Steele Join US Capital Partners

Leading private investment bank for the lower middle market appoints Managing Director and additional Vice President following another year of strong business growth.

SAN FRANCISCO, JANUARY 2016 – US Capital Partners Inc. announced today that Stephen M. Diamond has joined the firm as Managing Director, and Patrick Steele as Vice President. Headquartered in San Francisco, US Capital Partners is a private investment bank that makes direct debt investments, participates in debt facilities, and has robust distribution for debt and equity private placements for small and medium-sized businesses.

Stephen DiamondStephen Diamond has over 25 years of venture capital, private equity, and global management experience in the technology industry. Prior to joining US Capital Partners, Mr. Diamond has been an investor, board member and strategic advisor to start-ups, growing companies, and venture capital and private equity firms.

Earlier, Mr. Diamond was a General Partner and head of the technology investment practice at Sprout Group, a $3 billion venture capital and private equity affiliate of DLJ and Credit Suisse. At Sprout, he led deals at all stages from seed to growth and buyouts, with numerous successful exits. Before joining Sprout, Mr. Diamond was Group VP and Worldwide Research Director at Dataquest/Gartner Group, where he managed the largest industry analyst team covering the global communications industry.

Patrick SteelePatrick Steele is a financial services professional with more than 30 years of experience. Recently, Mr. Steele joined forces with Jacques Habra, Director of the Quantified Fund, a newly formed private equity offering. Prior to this, Mr. Steele was a Senior Vice President at Bernzott Capital Advisors, having previously served as a Regional Officer of The AYCO Company, a Goldman Sachs subsidiary. Before that, Mr. Steele was Managing Director of First Republic Investment Management, formerly Starbuck, Tisdale & Associates, where he worked for over twenty years.

“I am delighted to welcome Stephen Diamond and Patrick Steele to the firm,” said Jeffrey Sweeney, Chairman and CEO at US Capital Partners. “Stephen and Patrick have joined the firm’s Investment Banking group following another year of increased demand for our innovative, customized debt and equity financing solutions and best-in-class private placement services. Stephen and Patrick bring many years of experience in venture capital, private equity, financial services, and M&A to US Capital Partners, helping to position the firm and its investment management platform for further significant growth in 2016.”

About US Capital Partners Inc.

Since 1998, US Capital Partners ( has been providing well-structured, custom financing solutions to private and public companies with $5 million to $100 million in sales. Headquartered in San Francisco, US Capital Partners is a full-service private investment bank that makes direct debt investments between $500,000 and $50 million, participates in debt facilities, and has robust distribution for debt and equity private placements. The firm also offers financial advisory services for buy-side and sell-side engagements and for capital formation, including early-stage financings requiring equity or debt.

To learn more about US Capital Partners or its upcoming digital investment platform, email Jeffrey Sweeney, Chairman and CEO, at or call (415) 889-1010.


Why Are Asset-Based Loans for Smaller Businesses So Expensive

An inside look into the cost structure of asset-based loans compared to commercial bank loans, and whether or not predatory pricing practices are at play.

Many smaller businesses don’t qualify for bank financing: either their credit scores are too low, the business is new, or other circumstances place them outside the strict lending parameters of a bank. Even if a business does qualify for a bank loan, the process may move too slowly for the company’s liking. Thankfully, alternative lenders like US Capital Partners can provide accounts receivable financing, machinery and equipment loans, purchase order financing, inventory loans, and much more.This type of financing, known as asset-based lending, or ABL, is on the sharp increase.

But why does ABL sometimes seem so expensive?

  • Is ABL perceived as riskier than commercial and industrial (C&I) loans?
  • Is this a case of predatory pricing by alternative lenders?
  • Is this an issue of scale, where larger allocations become cheaper to administrate?

Comparing Cost Structures: An Inside Look

Interestingly, the default rates on ABL and C&I loans are actually similar to each other. In both types of financing for smaller businesses, the risk-adjusted premiums are therefore similar too. However, ABL and C&I loans have very different cost structures. The cost of initial underwriting and of monitoring over time is low for C&I loans, while in ABL these costs are much higher. This is because ABL underwriting is more robust, and there is continuous monitoring over the lifetime of the loan.

In other words, the risk-adjusted interest component in ABL is really modest, just as in commercial lending. It is underwriting and loan servicing costs that drive up the overall cost in ABL. These underwriting and loan servicing costs are more like fixed costs. They are proportionally higher for smaller credits. For larger companies, these costs are amortized over greater financing amounts.

Is There Any Predatory Pricing?

There is a common belief, especially among hedge fund managers and sponsors, that there are inefficiencies and predatory pricing in the small business lending space. But they are wrong. What is driving the cost of ABL is a very different cost structure. Lenders in this space need deep underwriting and collateral monitoring experience, and unlike for C&I loans, the specialized task of monitoring assets extends across the loan cycle.

The ABL market is made up of many “pools” of lenders that have different risk appetites. Within each such pool, there is an efficient, competitive environment. But as a borrower, you need to know which pool to “fish” in. Borrowers need to be cautious which group they approach, given the risk profile of their business. This is difficult for an entrepreneur to know, and lenders may not necessarily reveal that they are in the wrong pool for you.

To learn more about how your business can secure the funding it needs, email Jeffrey Sweeney, Chairman and CEO, at or call (415) 889-1010.


5 Key Business Financing Trends and Predictions for 2016

Financing options have been expanding steadily for smaller businesses over the past decade. Will this trend continue? Find out what lies ahead for business borrowers this year.

The financing market for small and medium-sized businesses (SMBs) has undergone major transitions over the past decade, as banks retrenched from the space and alternative lenders stepped in to fill the void. But 2016 may see new trends emerging. Here are five key developments we think are worth tracking this year.

1. Continued Use of Unitranche

In the competitive, high-multiple deal environment expected this year, closing transactions quickly will be important. Given this, unitranche loans are likely to remain popular in 2016. These structures, which combine senior and subordinated debt into one instrument, often carry blended amortization that comes out to less than that of a first-lien and second-lien combination. Many unitranche financings are based on a floating Libor rate, but they will likely remain popular even when interest rates rise.

2. Regulatory Changes and Complexity

Since the financial crisis, regulatory pressures have prompted banks to divest themselves of “risky” or capital intensive businesses or departments. As a result, banks have withdrawn from lending to certain constituents, such as SMBs. Traditional lenders are focusing ever more on regulatory capital requirements. This is expected to result in reduced leverage for commercial finance companies and other entrepreneurial lenders, leading to a pull back in some forms of alternative finance.

3. Disruption by FinTech Firms

Amidst the regulatory pressure, non-banking financial institutions, especially FinTech firms, will increasingly impact the future landscape of banking. The origination volume of online lenders has been rising dramatically, by about 175% each year, in comparison to a steady decline of about 3% among traditional banks. Many traditional banks remain behind the curve. This trend forms part of what Jeffrey Sweeney, Chairman and CEO at US Capital Partners Inc., describes as the ongoing “democratization of capital.” However, increased regulation and compliance are becoming a reality as the sector matures and scales up.

4. Banks and Alternative Lenders Working in Partnership

Rather than operating as competitors, traditional banks and alternative lenders will increasingly begin collaborating. For example, JPMorgan Chase, the largest US bank, has recently partnered with alternative lender On Deck Capital Inc. to speed up the loan process for millions of small-business clients. Likewise, Citibank has partnered with online marketplace lender Lending Club, while ING is partnering with Kabbage. In 2016, we are likely to see a marriage between FinTech firms and banks, as banks try to close their innovation gap and overcome legacy systems.

5. Strong Interest in Refinancing

Business credit and cash flow has been improving steadily for smaller businesses since the financial crisis. Many of these businesses, however, remain locked in constraining or costly financing structures, hampering their ability to grow. As the economy continues to grow and new commercial opportunities arise, we believe the improved financial footing of these SMBs will lead to an increasing number of them seeking to refinance existing debt.

To learn more about how your business can secure the funding it needs, email Jeffrey Sweeney, Chairman and CEO, at or call (415) 889-1010.