Testing the Narrative – Banks and Private Credit

By Javier Casillas, Chief Investment Officer, H.I.G. WhiteHorse

February 26, 2026 – The prevailing media narrative portrays private credit and traditional banks as competitors fighting for control of corporate lending. Coverage often frames direct lending as an encroachment on banks’ historical role in leveraged finance and the middle market. Headlines emphasize banks “reclaiming” deals, margin compression, and market share shifts. The implication is clear: private credit grows at banks’ expense.¹

Based on our experience at WhiteHorse, that framing is incomplete.

It largely reflects activity in the upper market—refinancings of large, syndicated loans—rather than the broader middle market. It also overlooks how capital actually reaches most operating businesses. In our experience at WhiteHorse, the relationship between banks and private credit in the $20–$100 million EBITDA segment is far more collaborative than adversarial.

The middle market is not a niche. It is the numerical core of the U.S. corporate landscape. U.S. Census data report firms by revenue rather than EBITDA. Applying a 10% EBITDA margin assumption, companies generating $20–$100 million of EBITDA would generally correspond to businesses with roughly $200 million to $1 billion of annual revenue. Based on Census revenue breakouts, this implies approximately 16,000 companies nationally within that EBITDA range. Firms exceeding $100 million of EBITDA (implying revenue above roughly $1 billion under the same margin assumption) number closer to approximately 3,000.² The scaled middle market is therefore far larger than the upper market that dominates much of the competitive narrative. This is the core opportunity set for WhiteHorse and its peers.

This distinction matters because regional bank risk capacity is not what it once was. Over the past decade, capital and liquidity regimes, tightening cycles, and the 2023 regional banking stress have reinforced a structurally more conservative balance-sheet posture.^{3 4}Banks continue to lend, but they allocate risk more selectively—particularly around leverage, hold sizes, and capital-intensive growth projects. Empirical research examining the interaction between bank lending and private credit finds little evidence that private credit displaces traditional bank lending; instead, borrowers accessing private credit are frequently also active bank borrowers.⁵ The evidence supports complementarity, not substitution.

In practice, core banking functions remain anchored within the regulated system. Revolving credit facilities, treasury management, payments, and hedging services reside with banks. Private credit typically provides committed term capital for acquisitions, shareholder transitions, vertical integration, and expansion initiatives—uses that can strain regional bank balance sheets under current risk frameworks.⁶ The result is incremental capital formation, not displacement.

WhiteHorse operates within this reality. For more than 15 years, we have provided financing solutions to middle-market companies. With approximately $15 billion⁷ of assets under management, we focus on businesses generating $20–$100 million of EBITDA and requiring strategic, non-routine capital. Recent examples include funding fleet expansion for infrastructure contractors, financing the construction of a new fuel terminal, and supporting build-out of domestic manufacturing as part of a vertical integration strategy. These projects require scale and certainty of execution—features that are often difficult to accommodate fully within regional bank hold limits.

In many cases, regional banks introduce these opportunities as part of an effort to provide an integrated solution to long-standing clients whose project or acquisition financing needs exceed internal risk parameters.¹ The bank retains the core relationship and operating services, while private credit supplies committed term capital.

Our capital markets platform reflects this partnership model. We share deal flow with banks in both directions and maintain active relationships with national and regional institutions across our twelve offices. Over the last decade, WhiteHorse has sourced more than 1,000 opportunities directly from banks and bank-affiliated platforms. This cooperation is not episodic; it is structural.

Together, private credit and banks provide an incrementally more stable pool of financing. Banks and private credit operate under distinct funding models and risk frameworks, and they respond differently under periods of stress. The events of 2023 underscored how funding structures can influence balance-sheet flexibility and credit availability. Private credit funds operate under a lower leverage, longer duration profile. The presence of both regulated bank capital and long-duration private capital in the middle-market provides structural diversification, resulting in a more resilient pool of capital than either model would alone.

The “existential threat” narrative is compelling.⁸ It is also misleading. In the middle market, growth financing is driven far more by coordination than by competition. Private credit has not replaced banks; it has broadened the system—and strengthened the middle market in the process.