Why We Created CovenantIQ

Every business needs capital to grow and thrive, and companies rely on two primary funding sources: debt and equity. While both are essential to business financing, each comes with distinct benefits and costs.

Debt is often a more cost-effective option—it preserves ownership and typically includes tax-deductible interest payments. A wide range of debt instruments is available, with the most suitable option depending on the borrower's financial situation.

The Role of Innovation in Debt Markets

Innovation in corporate debt and banking has fueled economic growth for centuries. The Medicis’ development of letters of credit and double-entry accounting in the 15th century revolutionized trade and financial transparency. In the 19th century, U.S. railroad bonds laid the foundation for the modern corporate bond market. By the late 20th century, leveraged buyouts (LBOs) led by firms like KKR transformed corporate finance, giving rise to private equity and buyout firms that reshaped industries. At every stage, advancements in debt markets have expanded access to capital, driving business expansion, job creation, and economic dynamism.

The Debt Gap for Lower Middle-Market Companies

Despite decades of financial innovation, lower middle-market companies still struggle to access the debt capital they need to grow. While large corporations leverage sophisticated credit markets, high-yield bonds, and private credit, smaller businesses face limited options, restrictive loan terms, and high borrowing costs. Traditional banks are often hesitant to lend without significant collateral, while private credit solutions remain geared toward larger deals. As a result, many lower middle-market companies are unable to secure flexible financing, limiting their ability to scale, innovate, and create value.

As these companies seek larger debt financing, they typically transition from asset-based loans—secured by tangible collateral like receivables—to cash flow-based loans, where the business’s overall value serves as collateral. These loans depend heavily on future financial performance and require highly customized credit agreements with comprehensive covenant packages and ongoing compliance monitoring.

Our Mission: Modernizing Middle-Market Lending

As former bankers and operators, we’ve experienced these challenges firsthand—gathering and normalizing financial data, preparing pitch decks, identifying and engaging investors, navigating due diligence, and managing loans post-underwriting. We built CovenantIQ to transform middle-market lending, streamlining the underwriting and monitoring of cash flow-based loans for banks, private credit firms, and middle-market businesses.

Unlocking a $3.4 Trillion Market Opportunity

The 250,000 US-based middle-market companies currently underserved by traditional financial institutions represent a $3.4 trillion market opportunity in cash flow-based loans. To unlock this potential, three key barriers must be addressed:

• Private credit funds are not built to scale. The private credit industry lacks the resources to efficiently serve a high volume of businesses with smaller loan sizes.
• Regional and community banks lack in-house expertise. While these banks have strong relationships with middle-market companies, they often lack the specialized knowledge to underwrite and manage cash flow-based loans.
• Middle-market companies lack a standardized financial reporting framework. Inconsistent reporting creates inefficiencies, driving up underwriting and monitoring costs.

The CovenantIQ Solution

CovenantIQ standardizes private credit by transforming how cash flow-based loans are managed. Our intelligent loan monitoring platform empowers regional and community banks, as well as private credit funds, to efficiently underwrite, monitor, and syndicate these loans.

With real-time integration into borrower and lender systems, CovenantIQ:

• Standardizes borrower financials with a structured data model and well-defined taxonomy
• Provides a shared view of financial performance and loan covenant compliance
• Delivers real-time insights into key financial indicators for proactive risk management

By modernizing middle-market lending, CovenantIQ equips financial institutions with the tools to scale private credit, unlock new lending opportunities, and drive confident growth.

‍