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Shadow credit and the private, middle market: Pre-crisis and post-crisis developments, data trends and two examples of private, non-bank lending

Craig Anthony Zabala (The Concorde Group, Inc., New York, New York, USA)
Jeremy M. Josse (US Financial Institutions, KPMG Corporate Finance, New York, New York, USA)

Journal of Risk Finance

ISSN: 1526-5943

Article publication date: 19 May 2014




The purpose of this paper is to analyze a particular segment of the US “shadow banking” market and its revival since the recent credit crisis, namely, lending to the private Middle Market, defined as financings of $5-100 million to non-public, unrated operating entities or pools of assets with not more than $50 million in earnings before interest, taxes, depreciation and amortization.


The analysis includes a review survey of a segment of capital markets and primary evidence from direct participation in two examples of actual private, non-bank lending between 2011 and 2012 executed by a Middle Market US investment bank.


While there have been considerable challenges, historically, in providing credit for small-and mid-sized businesses in the USA, private Middle Market capital is (post the recent credit crisis) finding opportunities, notwithstanding, constraints imposed by market and other forces, including systemic crises, cyclical forces and changes in regulatory regimes.

Research limitations/implications

Any generalization is limited due to the absence of disaggregated survey data for the US capital markets and the limited examples examined.

Practical implications

The capital markets segment and non-bank financial institutions examined in this paper are developing as an alternative source of credit/lending from commercial banks for mid-sized companies.

Social implications

The mid-sized firms financed by the shadow credit market are a significant source of job creation in the US economy making non-bank credit a lifeline to job growth in the financial crisis.


Direct participation is unique to the firms studied. Value is in developing a general framework to analyze different segments of the capital market.



The authors want to thank Gerald L. Brodsky and Richard J. Kelly for their useful comments and insights. They also thank the Financial Institutions Group, KPMG Corporate Finance and KPMG’s Banking and Capital Markets Group and Private Markets Group and KPMG’s Advisory Institute and Global Enterprise Institute for their sponsorship. Finally, they thank the anonymous reviewer for suggestions and criticisms which were very helpful.


Anthony Zabala, C. and M. Josse, J. (2014), "Shadow credit and the private, middle market: Pre-crisis and post-crisis developments, data trends and two examples of private, non-bank lending", Journal of Risk Finance, Vol. 15 No. 3, pp. 214-233.



Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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