Simon Longfield, restructuring partner at accountancy firm Grant Thornton, believes the correction in the credit markets will have less impact on growing businesses than many have assumed.

Simon Longfield, restructuring partner at accountancy firm Grant Thornton, believes the correction in the credit markets will have less impact on growing businesses than many have assumed.

The main effect of the credit squeeze so far has been on the “jumbo” private equity deals; the ones that have been attracting all the press coverage. These have dried up completely. A couple of the big banks have stopped all leveraged loans above £25 million.

Smaller businesses, though, won’t need that kind of leverage. Banks are still lending in that space. They’re being a bit more cautious, but they still have to make money at the end of the day.

Admittedly, there’s been speculation that because the highly leveraged loans have stopped, banks will have to make a higher return on their loans to smaller companies. But in my experience, I haven’t seen that happening.

Actually, banks are loving the credit squeeze because they’re no longer being pressured into writing “covenant-lite” deals by the private equity community. Although they won’t admit it, private equity firms don’t have the degree of control of mergers and acquisitions that they used to.

There’s quite a lot of interest in what hedge funds, or other “opportunistic lenders”, will do. These are the institutions who filled the space in the bigger deals with mezzanine or different tranches of senior debt. Now the bigger deals have stopped, they may move into the mid-market, or go to smaller businesses. After all, if the money’s there, they have to find a home for it.