A new white paper from the lender CastleGuard Partners addresses what it calls a hole in the government’s economic recovery plans. Nearly one third of all middle market companies are having difficulty accessing credit, due in part to the hole.
“Mid-size companies, too large for SBA loans but too small to issue bonds or benefit from other government pro¬grams, have been largely shut out of the government’s stimulus efforts and the improving debt markets,” CastleGuard writes.
Large companies have been issuing bonds at an increasing rate—the first half of this year saw a 59% jump over the first half of last year. But mid-sized companies are too small to issue public debt and benefit from the high yield bounce back. Loan issuance in the middle market fell 49% to $27.7 billion in the first half of 2009.
To solve this conundrum, CastleGuard argues in favor of the government’s Legacy Loan Problem, which hasn’t really gotten off the ground yet, TALF for the middle market, and increasing the size limit for SBA loans, and removing the unfavorable tax treatment for debt trading below par. Read the entire paper below.