Borrowing costs are the chief obstacle for the mid-market businesses that underpin the world economy, constraining their efforts to finance expansion at a time when governments are desperate for economic growth.
Research conducted by Moore Global among business leaders of mid-sized companies revealed 35% of respondents saw higher rates as a key challenge in accessing finance over the past 12 months.
The study showed that high borrowing costs and tighter financial conditions were feeding through into the behaviour of firms and weighing on day-to-day activity.
One third of respondents reported they increased prices to preserve profitability – which, of course, contributes to wider inflationary pressures.
A similar number of firms were switching focus away from external finance towards internal funds. Such behaviour may come at the expense of savings buffers which otherwise may have been used to fund investment or cushion against future shocks.
Other responses to higher borrowing costs included reducing investment plans and hiring activity, both which are likely to have long-term negative implications for growth and productivity.
Businesses in the, US, UK and South Africa felt the pinch most in our survey but the euro area, where the rate environment is easier, offers little refuge. The European Central Bank’s latest survey on the access to finance of enterprises found that a net 42% of firms reported higher interest rates on bank loans in the second quarter, sharply up from the previous quarter.
Difficulties with securing finance from traditional sources, such as banks, has led to many business leaders exploring private capital markets and other alternative sources of funding.
The awkward middle
Mid-sized companies are often squeezed by the structure of the market. A survey by the UK lender Shawbrook, of decision-makers at mid-sized businesses found that 63% did not fit traditional lending criteria, while 32% could not access sufficient capital.
Such firms tend to rely on bank lending, much of it floating-rate or short-dated and so feel changes in policy rates quickly. Large corporates can turn to public bond markets and lock in cheaper debt before rates rise, while the smallest borrowers are often served by loan guarantee schemes and specialist lenders.
Mid-sized firms have neither advantage: they are too big for small-business finance schemes and too small for the bond market.
Private capital is increasingly filling the gap. A study of about 400 US middle-market companies by the National Center for the Middle Market and Future Standard, found that private equity (PE) ownership, and the debt financing that can accompany it, can significantly accelerate growth.
PE houses can also offer mixed structures of debt and equity that banks cannot provide. Among companies without an external financial sponsor, almost half said they were likely to consider private equity within three years.
Bain Capital said its private credit group invested about $6 billion in the first half of 2026 in middle-market and sponsor-backed companies, supporting refinancing, buyouts and add-on acquisitions.
Private capital steps in
These evolving market dynamics have changed the role of private capital – from a singular focus on acquisition to a more nuanced position as a problem-solver for robust but cash-strapped companies.
Private equity has traditionally been associated with acquiring businesses, combining equity with debt and seeking to create value through growth towards an ultimate exit. That model remains important but the current financing environment shows it is much more flexible.
“Private capital is becoming more about the problem being solved,” says Candice Czeremuszkin, Moore’s global leader in private equity. “Higher financing costs mean that leverage has a more direct impact on the cash available to a business and therefore on the resilience of the overall investment case.
“That makes questions around revenue growth, margins, cash generation, operational performance and the ability of management to execute increasingly important. Private capital can provide another route when traditional financing does not perfectly fit the requirement.”
Private capital does not necessarily have to replace bank financing. Bank debt may remain appropriate for a business with predictable cash flows and a strong balance sheet. Equity may be better where a business is investing for growth and does not want additional debt. Other forms of private capital can potentially sit between those two.
Consequently, financing strategies in the current climate are less about finding a single source of money and more about understanding the capital structure that best supports the business objectives.
“The capital market is becoming more discerning but access to capital is not simply about whether money is available,” says Moore’s Candice Czeremuszkin. “It is about price, structure, risk and the strength of the underlying proposition.
“For businesses, that means being much clearer about what capital is actually required and what it is intended to achieve. For investors and lenders, it means being increasingly disciplined about where their money is deployed and how the risk is structured.
“I think the current environment creates an interesting opportunity for private equity and private capital to provide the right funding in the right structure at the right point in a company’s lifecycle.”
Where now?
The Moore Global research expects restrictive monetary policy to remain a key challenge throughout the year: which, in turn, creates nervousness around the impact of borrowing costs rising abruptly.
Even when central banks do eventually ease policy, traditional lenders reprice slowly and credit standards remain tight. That means there is likely to be a lag before the benefits are passed through to mid-sized borrowers.
The stakes are high. Mid-sized companies are significant employers and a source of investment and productivity growth. If they are starved of affordable capital, the effects will show up in weaker hiring and capital expenditure.
Until policy eases, leaders of businesses in this sector face a stark calculation. Borrowing is expensive, but delaying investment also carries price that is not always immediately obvious. Private capital may be the key to unlock the door and keep growth on track.