Jeff Schwartz

A number of those businesses have continued to stagnate or have taken a downturn since the pandemic.

and are looking at what people recognize as a pretty significant maturity wall of Main Street loans that are coming due in 25 and 26, towards the end of 25 and into 26, that will place a lot of pressure on small businesses and on the lending market.

The traditional lender, the lending market have continued to consolidate.

The regulatory environment has made it such that they are less inclined to lend money to small businesses, particularly on a levered basis.

And the emergence of more and more non-bank private credit funds have been lending very aggressively to smaller businesses or businesses in the middle market.

That goes back two, three, five years and more leverage in this part of the marketplace

should create opportunities for distressed and special situations investing.

So I think the next three to five years will be an important time for funds of that ilk.

Exactly.

So we raised our first distressed special situations fund coming out of the pandemic.

We came to the conclusion and we weren't entirely right because we didn't realize that the government was going to infuse so much capital into the capital markets to support these businesses.

But we thought there'd be a number of businesses that would be challenged coming out of the pandemic.

And our primary investment vehicle was our SBIC direct lending vehicle.

So we didn't want to put more challenged companies, more challenged credits in a levered, licensed SBIC fund.

It wasn't what we told our investors we were going to do, and it wasn't what we told the SBA we were going to do.

That fund was intended to invest in healthy, growing, performing businesses, not businesses facing challenges.

So we went to our LPs.

We hired a former bankruptcy attorney by background to help us run that fund.

And we went to our LPs and said, we think there's going to be a very significant opportunity here for distressed and special situations investing.

And that was in 2020.