Independent Sponsors FAQ
What Independent Sponsors Ask Us Most
Common questions about financing, deal structure, speed to close, and what makes Prospect Capital Management (“Prospect”) a different kind of capital provider for independent sponsors in the lower and core middle market.
Working With Us
Prospect & Our Sponsor Relationships
Does Prospect work with independent sponsors?
Yes. Prospect is an active capital provider (through its managed funds) to independent sponsors pursuing lower middle-market and core middle-market acquisitions. We work across a broad range of sponsor types, including independent sponsors, first-fund managers with committed capital vehicles, operationally focused sponsors, and industry-specific sponsors as well as traditional funded sponsors, on platform acquisitions, add-ons, refinancings, and growth financings.
What size companies does Prospect provide financing to?
We focus on companies with EBITDA ranging from less than $5 million to over $50 million. The lower and core middle-market segment is our primary focus, and we have deep experience structuring capital solutions for businesses across sizes and industries.
Does Prospect work with first-time or emerging independent sponsors?
Yes. We have a track record working with first-fund and emerging sponsors, not just established sponsors. We evaluate each situation on its merits and take a relationship-oriented approach for the long term, including with sponsors who are building their track record. Our approach includes being responsive throughout the investment process, including upon initially reviewing a potential opportunity, assisting the sponsor with due diligence, and providing financing support letters as needed to support sponsors with acquisition targets.
Financing Solutions
Deal Structure & Capital
What types of financing does Prospect provide to independent sponsors?
We provide one-stop financing solutions across the full capital structure, including senior term loans, unitranche debt, convertible debt, preferred equity, and minority or majority common equity. Our ability to provide multiple levels and types of capital in a single transaction simplifies execution and reduces closing risk for both the company / borrower and the sponsor / owners.
What is unitranche financing and when is it a good fit for an independent sponsor?
Unitranche debt combines senior and subordinated term debt into a single facility with a blended interest rate, typically from a single lender. For all sponsors, including independent sponsors, a single debt provider (like Prospect Capital) simplifies the diligence process and the capital structure, expedites closing, and reduces the number of counterparties you are negotiating with. This is particularly valuable in competitive and / or fast-moving processes.
Can Prospect finance add-on acquisitions for existing portfolio companies?
Yes. Supporting add-on acquisitions is a core part of what we do. We work with sponsors and companies / borrowers throughout the investment lifecycle, not just at initial platform acquisition. Our current portfolio of companies also creates collaboration opportunities between your targets and our existing portfolio companies.
How much capital can Prospect deploy in a single transaction?
Our target investment size ranges from $10M to $100M. Over our multi-decade history, we have invested over $300M in a single portfolio company. With over $22 billion invested and nearly 500 total middle-market investments executed, we have significant experience, expertise and capacity to meet the needs of your business.
Getting a Deal Done
Process & Speed
How quickly can Prospect move from initial conversation to a term sheet?
We engage early in the underwriting process and have a large investment team with broad industry expertise, which combine to allow us to progress with speed and rigor. We can discuss indicative terms quickly and work toward closing on competitive timelines, which is an important advantage when you are in a process against funded sponsors with committed capital. We can also work collaboratively to strengthen deal positioning by providing guidance and support letters to improve the chance of success in competitive processes.
What information does Prospect need to evaluate a deal?
To begin a conversation, we typically want to understand the target company’s business model, summary financial information (for example, revenues, EBITDA and capital expenditures), your investments thesis, the proposed transaction structure, and the use of proceeds. An executive summary or confidential information memo (CIM) is a helpful starting point, but we are happy to have an early-stage conversation before more formal materials are ready.
How do I get started with Prospect as an independent sponsor?
You can reach out directly through our contact page or call us at (212) 448-0702. We prefer to develop direct relationships with sponsors early, and before a potential investment is in process, so that we can move quickly when you need us.
Why Prospect Capital
Differentiation
Why should an independent sponsor choose Prospect over a bank or traditional private credit fund?
Unlike a typical commercial bank, we are not constrained by low lending multiples, rigid policies, regulatory leverage limits and / or bureaucratic approval processes tied to broader institutional priorities. Unlike SBIC funds, we are not subject to SBA program limitations on deal size, industry, or structure, allowing us to pursue more complex transactions that many SBIC lenders cannot touch. Unlike many private credit funds with finite fund lives, our permanent capital base means we are never forced sellers and have no fund duration pressure that could disrupt your deal.
We are flexible in ways many lenders are not, as we can make co-equity investments, offering one-stop solutions, and a wide range of capital amounts. You’ll work with the same deal team from day one through exit, rather than being passed along across the company, and receive enhanced support through the full lifecycle of investment, not just at close.
Does Prospect have industry preferences or restrictions?
We have financed companies across over 50 industries. Unlike commercial banks, which often have concentration limits, regulatory restrictions, or internal mandates to cap or exclude exposure to specific sectors, we evaluate opportunities based on business fundamentals rather than industry category. Our broad experience across sectors allows us to underwrite quickly and credibly in most situations, to assist the sponsor with diligence, and to not be limited by any sector-specific mandates.