When banks lend less: financing alternatives for mid-sized companies and asset owners

Corvus Management · As at November 2026

The ECB raised its key rates twice in 2026, taking the deposit facility rate to 2.50%, and held them on 29 October while stating that it is not pre-committing to a particular path.² Euro area inflation reached 4.0% in October, driven by energy, against a 2% target.³ Our October note looked at when to start a refinancing and what lenders look at first. This note looks at what to do when the bank's answer is less than the business needs: the alternatives, what each one costs and how they can be combined.

Why banks are lending less

In the October 2026 bank lending survey, a net 9% of euro area banks tightened credit standards for loans to firms in the third quarter, more than the 5% they had anticipated three months earlier. They cited higher perceived risks and lower risk tolerance, with some pointing to geopolitical uncertainty and energy prices, and they expect to tighten further in the fourth quarter. Rejection rates rose for all borrower groups.¹ Long-term rates have moved in the same direction: the German ten-year yield rose above 3.6% at the start of October, close to its highest level since 2009.⁴

Demand for bank loans from firms fell by a net 6% in the third quarter. Banks attribute this mainly to the level of interest rates, but also note a shift by some borrowers towards alternative sources of finance.¹ That shift is visible in private markets: European direct lenders closed 798 transactions in the first nine months of 2026, 3% more than a year earlier, and refinancings accounted for about a fifth of them.⁵

Six alternatives, and when they work

1. Private credit and unitranche

A single lender, or a small group, provides senior or unitranche debt in place of a bank club. Decisions are usually faster and leverage more flexible, at a higher margin and often with tighter information undertakings. It suits cash-generative businesses with a clear plan, particularly where the amount or the leverage exceeds what the incumbent bank will hold.

2. Asset-based lending

The facility is sized against a borrowing base of receivables, inventory or equipment rather than against earnings alone. Availability moves with the asset base, which makes it well suited to working-capital-intensive businesses and to seasonal or cyclical cash flows. The trade-off is regular reporting and asset audits, and a facility that contracts when activity slows.

3. Receivables securitisation

Trade receivables are sold to a dedicated vehicle funded by banks or institutional investors. Where risk transfer meets the relevant accounting tests, the receivables can leave the balance sheet. It requires a sufficient and diversified receivables book, reliable data and several months to set up, but once in place it provides a funding source that is separate from the main credit facilities.

4. Sale and leaseback

The company sells an operating property, such as a headquarters, warehouse or hotel, to an investor and leases it back on a long lease. It releases capital tied up in real estate at property-market pricing, often on better terms than a loan against the same asset. In exchange, the company pays rent, gives up the residual value and, under IFRS 16, still recognises a lease liability on its balance sheet.

5. Non-strategic asset disposals

Selling a subsidiary, a business line, a property or a minority stake reduces debt without adding a new liability. The constraint is time and price: a disposal launched under financing pressure tends to be negotiated from a weaker position. Prepared early, it can be run in parallel with a refinancing and reduce the amount that needs to be raised.

6. Hybrid capital: convertibles and minority equity

Where senior debt capacity falls short, subordinated or convertible instruments, or a minority equity investment, can fill the gap. They absorb risk that senior lenders will not take, at a higher cost and with dilution or governance rights for the investor. Structured carefully, they allow the founding shareholders to keep control while restoring headroom under the senior facilities.

Four questions before choosing

What can the business pledge or sell? Receivables, stock, equipment and property each open a different route. A business with few tangible assets will rely more on its cash flow, and therefore on private credit or hybrid capital.

How stable is the cash flow? Predictable, contracted revenue supports term debt. Volatile or seasonal revenue is often better served by facilities that adjust with the asset base.

How much time is there? Private credit can move in weeks. A securitisation, a sale and leaseback or a disposal usually takes months, and works best when started before the existing facility nears maturity.

What can the shareholders accept? Each option trades cost against control, reporting and dilution. The right answer depends as much on the owners' objectives as on the numbers.

Combine rather than replace

The most effective solutions often keep the bank in place and add one or two alternatives around it: a sale and leaseback that reduces the senior requirement, an asset-based line for working capital alongside a smaller term loan, or a minority investment that restores headroom ahead of a refinancing. Combining sources requires care. Security ranking, intercreditor terms and the consent of existing lenders under negative pledge or disposal restrictions need to be addressed before any approach is made, and the sequence matters as much as the structure.

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How we help

Corvus Management advises companies, families and asset owners on debt and balance sheet financing. We assess the full range of options, from the incumbent bank to private credit, asset-based finance, securitisation, sale and leaseback, disposals and hybrid capital, then prepare the case, approach the right counterparties and negotiate through to closing. We have no lending book and no ties to any lender, and we are paid by our clients only.

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