Resource Logo

Hello, you are using an old browser that's unsafe and no longer supported. Please consider updating your browser to a newer version, or downloading a modern browser.

Receive Updates
Resource Arrow Back to all
Date: November 29, 2017
Tags: markets

The Shift in Middle Market Lending May Create Investment Opportunities [Video]

Created with Sketch. Run Time: 2:15
Michael Terwilliger Portfolio Manager Resource Credit Income Fund
International banking standards such as Basel III, which require banks to keep capital on their balance sheet in reserve against loans, are going to keep the big banks from reentering the middle market.

Everyone remembers the 2008 Recession. Economic collapse and market turmoil paralyzed the capital markets. Washington’s response to all of this was, perhaps not unsurprisingly, heightened regulation. Dodd-Frank is probably the most notable, the most memorable piece of legislation that came out of this era.

It’s a massive, extremely complex law that, from a high level, adds additional reporting for big banks, while at the same time, reducing risky trading activity that contributed to the downturn.

Now, most market observers would argue that Dodd-Frank has had some positive impacts in helping reduce risk in the marketplace, but it has, at the same, had some very negative, unintended consequences. Most notably, it has created a void in how small and medium sized businesses obtain the capital to grow their businesses.

Now, think about the banking system since the downturn. The big banks have only gotten bigger from crises era consolidation. These massive institutions have tilted away from lending to small and medium sized businesses with increased regulatory cost.

At the other end of the continuum are small and community banks. These are businesses that frankly lack the capital, and they lack the resources to fill in that void, hence the lending gap.

Fortunately, we live in a dynamic economy. There have been a number of new channels that have grown in recent years to help both meet the needs of capital for small and medium sized businesses, while at the same time, creating new investment opportunities for individual retail investors.

Things such as BDCs, or business development companies, the proliferation of CLOs (collateralized loan obligations), and private credit funds that have launched in recent years. All of these have helped fit the need of small and medium sized businesses, and today, the middle market is thriving.

Ultimately, we take the view that a total repeal of Dodd-Frank is highly unlikely in a politically polarized Washington. However, international banking standards such as Basel III, which require banks to keep capital on their balance sheet in reserve against loans, are going to keep the big banks from reentering the middle market.

That’s why we think that this is an exciting investment opportunity for individual investors for years to come.

This information is educational in nature and does not constitute a financial promotion, investment advice, or an inducement or incitement to participate in any product, offering or investment. It is not intended to be used as a tool to determine your specific financial situation, tax status, investment objectives, investment experience, suitability for any specific investment, risk tolerance or investment profile. Resource is not adopting, making a recommendation for or endorsing any investment strategy or particular security.

Resource is the marketing name for Resource Real Estate, LLC, Resource Alternative Advisor, LLC, and their affiliates. Resource may distribute certain products through Resource Securities LLC, a wholly owned broker/dealer, Member FINRA/SIPC


The information contained herein does not constitute an offer to sell or a solicitation to purchase securities. Such offers or solicitations can only be made by means of a prospectus. Prior to making any investment decision, you should read the applicable prospectus carefully and consider the risks, charges, expenses and other important information described therein. The value of your investments may decline, and you could lose some or all of your investment. To obtain a prospectus containing this and other information, please call (866) 773-4120 or download the file from Read the prospectus carefully before you invest.


Resource has an interval fund that is distributed by ALPS Distributors, Inc. (ALPS Distributors, Inc. 1290 Broadway, Suite 1100, Denver, CO 80203). Resource Alternative Advisor, LLC, Resource Real Estate, LLC, their affiliates, and ALPS Distributors, Inc. are not affiliated.


Performance data quoted represents past performance. Past performance is no guarantee of future results and investment returns and principal value of the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted above. For performance information current to the most recent month-end, please call toll-free (866) 773-4120 or visit


All statements and information other than statements of historical fact included on this website regarding strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. When used on this website, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. You should not place undue influence on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make on this website are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved because of the number of risks and uncertainties, many of which are beyond our control, including but not limited to uncertainties concerning the properties being operated and sold or refinanced, leverage and meeting debt service obligations, operating properties in different locations throughout the U.S., general, market or business conditions and changes in laws or regulations. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. To check the background of Resource Securities LLC or any registered individual, please go to FINRA’s BrokerCheck.