This is the third in a three-part series on the private credit deal cycle. Part one covers
bookbuilding. Part two covers term sheets and negotiation.
Most private equity professionals spend a great deal of time and energy on the front end of a debt financing — selecting lenders, running the bookbuilding process, negotiating term sheets. Once the deal closes, however, lender relationship management tends to become reactive. Sponsors engage with lenders when they need additional financing, when they need a waiver, or when a portfolio company is in trouble. In the meantime, the relationship drifts.
This is a mistake, and the evidence for why is stronger than intuition alone.
Academic research, legal analysis, and the lived experience of practitioners all point to the same conclusion: the quality of the sponsor-lender relationship post-close directly affects outcomes across the entire deal lifecycle — from how much flexibility a lender offers when a business hits a rough patch, to how competitive their terms are on the next deal. Managing that relationship actively, and having the right visibility to do so, is one of the most undervalued skills in private equity.
This post explains why post-close lender relationship management matters, what good looks like, and how the right tools give sponsors visibility that most firms currently lack entirely.
A common misconception among dealmakers is that the lender relationship is primarily a deal sourcing and execution matter. You need lenders to close deals, so you cultivate relationships during the process — and once the deal is done, they become a monitoring counterparty rather than a strategic partner.
The research tells a different story. A study by Young Soo Jang of Chicago Booth Business School, examining direct lending behaviour during the Covid pandemic, found that direct lenders were significantly more likely to defer payments for portfolio companies in distress — 25% of direct loans saw payment deferral, compared to 9% for bank loans. Direct lenders were also far less likely to enforce bankruptcy proceedings: 3% versus 14% for banks. I would also recommend that you read Termgrid’s summary of this research.
But this flexibility was not unconditional. It was strongly associated with continued sponsor involvement — including equity injections from sponsors in 40% of cases, compared to 23% for bank lenders. The lender’s willingness to be flexible was directly linked to their confidence in the sponsor’s ongoing commitment to the business.
The implication is clear: the relationship between a sponsor and a direct lender does not simply enable deal sourcing. It actively shapes outcomes throughout the life of the loan, including at the moments when it matters most.
McDermott Will & Emery made a similar point in their recent analysis of private equity financing lifecycles: companies that approach lenders proactively — including before liquidity becomes constrained — are better positioned to preserve options and reach consensual solutions. Early engagement, paired with a clear plan, fosters credibility. Sponsors who only appear when they need something arrive at a disadvantage.
Private equity firms have sophisticated systems for monitoring equity value across their portfolios — tracking EBITDA growth, revenue performance, and return on invested capital. What most of these systems do not do is monitor the debt side of the portfolio with the same rigour.
This matters because debt financing in private credit is not a static feature of a portfolio company’s capital structure. It has its own lifecycle — covenants that reset and need monitoring, amortisation schedules that affect cash flow, hedging positions that can shift in value, and maturity walls that require forward planning. A portfolio company can be performing well on an equity basis while carrying debt risks that are quietly building — a covenant approaching its limit, an interest rate hedge rolling off, a maturity that is eighteen months away and has not yet been addressed.
Most sponsors manage this with spreadsheets, email reminders, and quarterly reviews. The information exists, but it is dispersed across multiple portfolio companies, multiple lenders, and multiple deal documents — and pulling it together takes time that most capital markets teams do not have.
Termgrid’s Portfolio Management module is built specifically for this. Unlike general-purpose portfolio management tools designed around equity returns, it is built for the debt side — tracking covenants, capital structures, amortisation schedules, fees, financials, and hedging positions across the entire portfolio in one place. The result is a live, drill-down view of debt risks across every portfolio company, rather than a picture that is assembled manually at the point when someone needs it.
One of the most important questions a sponsor can ask about their debt portfolio is: which lenders are we most exposed to, and what does that mean for our next deal?
Lender concentration is a risk that builds gradually and is often invisible until it becomes a problem. A sponsor that has used the same two or three lenders across a significant portion of their portfolio has created a dependency — those lenders know it, and it affects the dynamics of every subsequent negotiation. When the sponsor needs a waiver, an amendment, or a new facility for the same portfolio company, the lender is negotiating from a position of strength. When the sponsor is trying to bring in new lenders on the next deal, the lack of a broader network limits competitive tension.
Termgrid’s Portfolio Management module includes a heatmap of lender exposure across the portfolio, which can be filtered by fund or facility. At a glance, a sponsor can see which lenders hold the most debt across their portfolio companies, where concentration has built up, and where the portfolio is well-diversified. That visibility informs decisions on every subsequent deal — deliberately spreading exposure to maintain competitive tension, or deepening relationships with lenders who have proven reliable and flexible.
The flipside of concentration risk is relationship depth. Knowing which lenders you have worked with most, across how many deals, and with what outcomes, is genuinely valuable information when selecting lenders for a new financing.
Research confirms this at a market level. A study published in Management Science found that borrowers working with relationship lenders experienced smaller pricing adjustments during bookbuilding — because established relationships reduce the information friction that drives pricing concessions. Termgrid’s own platform data shows that top-tier lenders interact with twice as many sponsors as even the broader top 30, and that gap widened further in 2024. The relationship is not just a soft benefit — it has measurable economic value.
Separately, the Block, Schulze, Jang and Kaplan survey of private debt funds found that sponsor-lender relationships built over multiple transactions result in more effective covenants and a willingness to lend at higher multiples. The relationship earns trust on both sides, and that trust translates into better commercial outcomes.
But most sponsors do not have a systematic view of their lender relationships. They have institutional memory — senior team members who know which lenders have been helpful on which deals — but that knowledge walks out of the door when people leave, and it cannot be queried, filtered, or used to inform decisions in a structured way. Even institutional memory held within the company is dissipated across emails, notes and even personal memory – making it difficult to see on a consolidated basis.
Termgrid’s Relationship Insights tool addresses this directly. It builds automatically from deal and portfolio activity — every lender interaction captured without manual data entry — giving sponsors a real-time view of which lenders they work with most, across how many deals, and at what depth. When a new deal is being prepared, that history informs lender selection: which lenders know this type of asset, which have been constructive partners in the past, and which relationships have been underutilised and might benefit from being deepened.
Understanding your relationship history with a lender is not just useful for lender selection — it changes the dynamics of negotiation, both on new deals and in difficult situations.
A sponsor who can demonstrate a long, productive relationship with a lender — multiple deals closed, consistent engagement, a track record of transparent communication — arrives at every conversation with credibility that a first-time borrower simply does not have. That credibility is worth something on pricing, on covenant headroom, and on the speed with which a lender is willing to move.
It also matters in distress. McDermott’s analysis notes that when performance deteriorates, lenders look for transparency, sponsor support, and visibility. Sponsors who have maintained active engagement throughout the life of the loan — providing information proactively, flagging issues early, keeping lenders informed of the business plan — are far better positioned to negotiate a consensual solution than those who have been absent. The Cambridge research by Narine Lalafaryan on private credit governance makes a similar point: private credit is evolving toward a genuinely relational form of finance, with lenders engaged in the governance of borrower companies well before any signs of distress emerge. Sponsors who understand and embrace that dynamic will consistently get better outcomes than those who treat lenders as purely transactional counterparties.
The relationship history captured in Termgrid’s Relationship Insights tool feeds directly into this. When a sponsor needs to have a difficult conversation with a lender — about a covenant breach, a business underperforming against plan, or a request for flexibility on repayment — knowing the full history of that relationship, and being able to demonstrate the depth and consistency of prior engagement, changes the tone of the conversation.
The value of relationship history is not limited to difficult situations. When negotiating a new deal, a sponsor who can demonstrate a deep and consistent relationship with a lender is better positioned to secure favourable terms — on pricing, on covenant headroom, and on the speed of execution. Relationship history also informs allocation decisions: sponsors who have visibility into which lenders have been the most constructive, reliable, and commercially flexible across previous transactions are better equipped to reward those lenders with larger allocations — deepening relationships that have proven valuable and signalling to the broader market which partnerships they intend to prioritise.
Drawing on the research and the practical experience of sponsors using Termgrid, a few principles stand out:
Stay visible between events. The worst time to contact a lender is when you need something. Regular, proactive communication — sharing business updates, flagging issues early, maintaining the relationship between transactions — builds the goodwill that pays dividends when you need flexibility.
Monitor the debt portfolio with the same rigour as the equity portfolio. Covenants, maturities, amortisation schedules, and hedging positions all deserve active monitoring, not just periodic review. A live view of these across the portfolio allows issues to be identified and addressed before they become urgent.
Understand your concentration. Know which lenders hold the most debt across your portfolio, and manage that exposure deliberately. A well-diversified lender base maintains competitive tension on future deals and reduces dependency risk.
Use relationship history deliberately. When selecting lenders for a new deal, draw on the full history of your interactions — not just the most recent transaction or the most senior person’s memory. Systematic relationship data produces better lender selection decisions.
Engage early in stressed situations. The research is unambiguous on this point. Sponsors who approach lenders proactively, with a clear plan and transparent information, achieve better outcomes than those who wait until options are constrained.
Termgrid’s Portfolio Management and Relationship Insights tools are built specifically for the debt side of the portfolio — the part that most equity-focused systems ignore entirely.
Portfolio Management gives sponsors a live view of covenants, capital structures, amortisation, fees, financials, and hedging across every portfolio company, with a heatmap of lender exposure filterable by fund o, facility. Relationship Insights builds automatically from deal and portfolio activity, capturing every lender interaction without manual data entry and delivering real-time visibility into the depth and history of every lender relationship.
Together they give sponsors a systematic, data-driven foundation for managing the debt side of their portfolio and the lender relationships that underpin it — purpose-built for debt rather than sitting in a general CRM or portfolio system that was never designed with private credit in mind.
Termgrid is the end-to-end platform for private capital markets. Used by sponsors, lenders, and advisors across more than 1,600 institutions, Termgrid brings structure, speed, and visibility to the debt financing process. For more on how the debt financing process works, read the Termgrid Primers series.
