2025 Mid-Market Lending:
A Year of Growth and Repositioning in Canada

Abstract: In 2025, mid-market lending in Canada is being reshaped less by short-term macro conditions and more by deep structural change. Ownership transitions, consolidation, and the rise of private credit are redefining borrower needs and competitive dynamics, shifting the market away from standardized, volume-driven lending toward judgment-based decision-making. As steady-state borrowers give way to event-driven credits, lenders must combine capital strength with structural creativity, sector insight, and a sophisticated understanding of transition risk. For the Canadian Lenders Association community, this moment represents a defining opportunity to lead, positioning thoughtful capital and collective expertise as essential enablers of the next generation of Canadian mid-market growth.

The Canadian mid-market is undergoing one of the most consequential transitions in its modern history. While interest rate movements and macroeconomic volatility continue to influence short-term outcomes, they are no longer the primary forces reshaping commercial lending. Instead, structural shifts in ownership, capital formation, competition, and borrower behaviour are redefining both demand for credit and the role lenders play in the economy.

For the Canadian Lenders Association community, this moment presents both a challenge and an opportunity. Mid-market lending is no longer a scale game. It is a judgment game. And judgment, unlike capital, cannot be commoditized.

The End of the Steady-State Borrower

Historically, mid-market commercial lending assumed relative continuity: stable ownership, predictable operating models, and incremental growth. Credit underwriting focused primarily on historical performance and near-term cash flow sufficiency.

That assumption no longer holds.

A growing proportion of mid-market borrowers are operating in transition. Family-owned enterprises are confronting succession realities. Founder-led businesses are seeking liquidity or strategic partners. Industries are consolidating under competitive and cost pressure. Technology adoption, labour constraints, and regulatory complexity are forcing strategic pivots.

For lenders, this means fewer steady-state credits and more event-driven risk. Loans are increasingly tied to acquisitions, recapitalizations, ownership changes, or integration plans. The central credit question has shifted from whether a business can service debt today to what that business will look like after change, and who will ultimately be accountable for outcomes.

This evolution is occurring against the backdrop of a highly concentrated Canadian banking system that remains structurally oriented toward residential and retail lending. While this has supported financial stability, it has constrained competition and flexibility in commercial credit. Standardized risk frameworks, centralized decisioning, and capital rules have limited banks’ ability to respond to nuanced mid-market needs, particularly during periods of transition.

That gap has not gone unfilled. Private credit, alternative lenders, and hybrid platforms have expanded rapidly, offering bespoke structures, faster execution, and greater tolerance for complexity. These players are no longer peripheral. They are now core market participants shaping pricing, terms, and borrower expectations. As a result, mid-market borrowers increasingly compare options across banks, non-banks, private credit funds, and capital partners. Relationship alone is no longer sufficient. Capability matters.

Succession and Consolidation

One of the most underappreciated drivers of lending demand today is demographic. A significant share of Canada’s mid-market businesses are owned by individuals approaching retirement age, many without a clear succession plan. This reality has triggered a surge in consolidation, partial exits, and private equity involvement.

From a lending perspective, this has reshaped the nature of capital demand. Financing is increasingly required for shareholder redemptions and management buyouts, leveraged acquisitions and roll-up strategies, bridge financing tied to future sale events, and structures that accommodate mixed objectives where owners seek liquidity while retaining involvement.

These transactions introduce governance risk, integration risk, and sponsor risk. They also create opportunity for lenders capable of underwriting beyond historical financials and understanding the dynamics of ownership transition.

… from Capital to Judgment

As a result, judgment has become the most valuable asset in mid-market lending.

Judgment means understanding when leverage is sustainable despite temporary disruption. It means distinguishing between cyclical softness and structural decline. It means assessing management depth, sponsor capability, and post-transaction alignment. It means knowing when flexibility preserves value and when discipline prevents loss.

This cannot be automated or fully centralized. It depends on experienced professionals, sector fluency, and institutional cultures that empower informed discretion. For the CLA community, this elevates the importance of talent, governance, and credit culture. The lenders that will outperform are those that invest in people and processes that support thoughtful decision-making, rather than relying solely on policy and precedent.

Structural creativity now sits alongside judgment as a core competency. Multi-layered capital structures are no longer exceptional. Senior debt increasingly operates alongside mezzanine tranches, preferred equity, seller notes, and earn-outs. Inter-creditor complexity has become standard.

This requires lenders to operate comfortably within ecosystems rather than silos, with fluency in structure, negotiation, and alignment. It also requires internal frameworks that treat structure as a risk-management tool, not a deviation from policy. Institutions that remain wedded to rigid, single-product approaches risk losing relevance in transactions where flexibility is decisive.

At the same time, sector insight has become essential. The mid-market is not monolithic. Labour intensity, input-cost volatility, regulatory exposure, customer concentration, and capital intensity vary widely across industries. Generalist underwriting struggles in this environment. The ability to distinguish resilient businesses from fragile ones increasingly depends on sector-specific understanding and shared intelligence.

What This Means for the CLA Community

These shifts point to a broader and more strategic role for the CLA itself. As mid-market lending becomes more complex, the value of a strong, credible industry forum increases. The CLA is uniquely positioned to facilitate cross-sector dialogue on emerging risks and capital structures, share best practices on underwriting transitions and succession-related credit, engage regulators on frameworks that support productive business lending, and elevate the voice of lenders navigating complexity rather than commoditization.

In a market where capital is abundant but insight is scarce, community becomes a strategic asset.

The next decade of mid-market lending in Canada will not be defined by who lends the most, but by who lends best. Institutions that combine capital strength with judgment, structural intelligence, and sector insight will shape outcomes for borrowers and the broader economy.

For the CLA community, this is a moment to lead. To move beyond volume metrics. To articulate the value of thoughtful capital. And to ensure that Canada’s mid-market enterprises have access not just to financing, but to partners capable of supporting them through change.

Top 5 Key Insights

1. Mid-market lending has shifted from scale to judgment
   Success in the mid-market is no longer driven by balance-sheet size or loan volume, but by the ability to underwrite complexity, assess transition risk, and make informed, experience-based credit decisions.

2. The steady-state borrower is disappearing
   A growing share of mid-market borrowers are in transition due to succession, consolidation, or strategic change, making event-driven risk and post-transaction outcomes central to credit assessment.

3. Structural capital gaps have accelerated alternative lending
   Canada’s concentrated banking system and standardized risk frameworks have created space for private credit and non-bank lenders, permanently altering competition and borrower expectations.

4. Succession and consolidation are major demand drivers
   Aging ownership and limited succession planning among family-owned businesses are fueling M&A activity and recapitalizations, increasing demand for flexible, transition-focused financing structures.

5. Sector insight and structural creativity are now essential capabilities
   Generic underwriting models are increasingly ineffective. Lenders that combine deep sector knowledge with the ability to structure layered, aligned capital solutions will outperform in the next decade.

Sign up for the CLA Finance Summit Series