For years, many equipment financiers have developed “soft” verticals targeting private equity sponsors as origination sources, with highly inconsistent success rates. The results run counter to logic.

PE-backed deals are often for middle-market, asset-intensive companies possessing a credit profile that lives beneath investment grade (where it can be difficult to compete with cash and mountains of low-cost liquidity) but above companies so leveraged, or cash flow limited, that only “story” lenders prevail. Sponsors need to maximize debt capital to preserve their equity, so partnering with equipment financiers should be a perfect marriage, but it largely hasn’t been.