Quiq Capital provides bespoke, tailored financing solutions to top-quality operators looking to expand their businesses with strategic working capital. Quiq Capital was founded by investment professionals with deep expertise in structured credit, asset management, and private credit across both public and private markets.
Closing a capital gap
Quiq Capital identified a market need based on mispriced opportunities and a dearth of debt capital for small to intermediate-sized loans ($500,000 – 10,000,000). Started in 2018, Quiq Capital formalized its operations in 2021 with a mission to help founders and operators maintain or accelerate growth. This allows them to create and sustain the necessary momentum to graduate to larger, more accretive debt providers.
Quiq Capital sees significant opportunity in the many small businesses that are highly successful with strong operating margins. By providing the right mix of strategic capital, these businesses can grow exponentially from a revenue standpoint and create multiples of enterprise value.
The Quiq capital approach to small business loans
A stringent origination and underwriting process is combined with ongoing, proactive asset management to track the performance of each loan product. The loan product is focused on value creation and EBITDA growth, creating a demonstrable path to a timely payoff in full. Unlike other lenders, Quiq Capital generally focuses on the higher end of small business loans to higher quality borrowers. They employ a hands-on approach to origination: rather than relying on modeled assumptions, they undertake a complete top-down, bottom-up analysis of the business plan, borrower, and guarantor with a focus on capital preservation.
Risk mitigation and due diligence are central to the Quiq Capital model. They regularly assess how borrowers’ business plans are progressing, enabling them to identify and structure around any potential hindrances. This includes active cash management monitoring—by understanding whether a loan will prepay, payoff at maturity or extend, Quiq Capital can better manage its cash and ultimately provide attractive, risk-adjusted returns to investors.
On an ongoing basis, Quiq Capital’s investment team actively identifies the most important attributes of its highest quality loan product and best origination partners, then seeks to build on those factors and partners. Each loan is risk-rated using 10 granular data points across five major risk categories. This quantitative grade is updated monthly by tracking ongoing performance relative to the business plan from origination to payoff. The data is cataloged and analyzed, providing empirical data to continually improve portfolio credit quality.
The Quiq Capital outlook for 2023
While some macroeconomic indicators have begun to point to slowing inflation, the Federal Reserve remains adamant on combating inflation. Until it’s abundantly clear that the tide has turned, likely through slower economic growth and higher unemployment, Quiq Capital expects that interest rates will remain ‘higher for longer’. Interest rate risk has been front of mind for investors this year; however, credit risk is likely to be a rising concern as economic conditions weaken and investors evaluate how much a recessionary environment will impact demand across industries.
Quiq Capital expects it will be able to tighten its credit box in 2023, selecting only the highest credit opportunities at higher interest rates than in 2021 and 2022. As such, they expect the downstream effects of quantitative tightening will lead to even more attractive, risk-adjusted returns.
In the latter half of 2023, Quiq Capital intends to market Quiq Income Fund II, LP. Expected to be funded with $50 – $100 million in equity commitments, Fund II will feature an equity component along with greater exposure to complex structured products. As revenue multiples compress and investors pull back the reins on new investments, Quiq Capital intends to pursue warrants as part of its financing for companies where it believes its financing can drive material enterprise value. Given the investment team’s experience in the world of structured credit, Fund II will also look to take advantage of market inefficiencies by seeking out mispriced, complex securities in public markets.
Percent’s ongoing work with third-party underwriters, borrowers, and investors reflects our mission to efficiently and effectively serve all aspects of and parties to private credit transactions. Through extensive underwriter tools, surveillance reporting, and full-featured investment platform, Percent makes private credit markets more transparent and accessible to more market participants.