How to Raise Capital Without Dilution: The 2026 LMM Operator Playbook

Updated Q3 2026 by CT Acquisitions.

If you own a lower-middle-market (LMM) business generating $1M to $25M of EBITDA and you want to know how to raise capital without dilution, the honest answer is that pure zero-dilution capital exists but the menu is narrower than most operators expect. In 2026, five non-dilutive or low-dilution instruments carry the majority of LMM growth and acquisition capital: senior cash-flow debt (bank and non-bank), unitranche, mezzanine notes with detachable warrants, sale-leaseback of owned real estate, and royalty-based financing. Each preserves common equity ownership at the operating company but trades off cash cost, covenant intensity, or asset encumbrance. This guide walks through every instrument, the named sponsors writing checks in your size range, the 2024 to 2026 comps that anchor pricing, and the process for running a competitive raise without giving away control.

What does “how to raise capital without dilution” actually mean for an LMM operator?

Raising capital without dilution means bringing outside money into the business without reducing your ownership percentage of the common equity at the operating company. For an LMM operator this typically involves senior secured debt, unitranche, mezzanine (with or without warrants), sale-leaseback of real estate, royalty financing, or non-convertible preferred equity. Ares, Golub Capital, and Twin Brook are three of the largest 2026 LMM lenders.

The phrase “no dilution” gets thrown around loosely. In its strictest form, dilution refers to a reduction in your common-equity ownership percentage. If you hold 100 percent of the common shares of Newco Holdings and you issue no new common shares, no conversion instruments, and no warrants, your ownership stays at 100 percent regardless of how much capital you take on the balance sheet. That is genuine zero dilution.

Most LMM operators want a version of this outcome without necessarily insisting on the purest form. They will accept a small warrant coverage (say, 1 to 3 percent penny warrants on a mezzanine note) if the trade-off is a materially lower cash coupon. They will accept a non-convertible preferred equity instrument that sits above common in the capital stack but never converts. What they typically will not accept is issuing 20 to 40 percent of the common equity to a growth-equity investor in exchange for a check.

The LMM lens matters here because most “how to raise capital without dilution” advice online is written for pre-revenue startups pursuing SAFE notes or convertible debt (which are technically deferred dilution instruments) or for real-estate syndicators using preferred equity waterfalls. Neither map neatly to an operating company with $2M to $25M of trailing EBITDA, real customer contracts, and an owner who does not want a new voting shareholder in the boardroom.

Who typically needs to raise capital without dilution in 2026?

The LMM operators most commonly running non-dilutive raises in 2026 fall into five buckets: founders funding an add-on acquisition, second-generation family owners recapitalizing to buy out relatives, ESOP-financing candidates, sponsor-backed portfolio companies doing a dividend recap, and platform CEOs financing a real-estate purchase or new facility. Antares Capital reports its Q1 2026 LMM origination volume was 44 percent add-on driven.

Consider a representative example. A 58-year-old owner of a $32M revenue HVAC distribution business generates $5.4M of EBITDA and wants to acquire a competing regional distributor for $18M. She could sell 35 percent of her company to a growth-equity fund like Trilantic North America or Northlane Capital for the cash. Or she could raise $14M of unitranche debt from Twin Brook plus $4M of mezzanine from Audax and preserve 100 percent of her common ownership. In 2026 rate conditions, the debt-financed path is cheaper on a five-year IRR basis even at SOFR plus 550 basis points, provided the combined entity supports the leverage.

The second common profile is the second-generation transition. A family patriarch owns 100 percent of a $9M EBITDA specialty-manufacturing company. Two of his three children work in the business and want to buy out the third sibling and the father over five years. A management buyout financed with senior debt, an SBA 7(a) loan up to $5 million, and seller notes preserves 100 percent common ownership among the acquiring management group without bringing in a private-equity minority shareholder. This is the classic structure CT Acquisitions helps design through its M&A advisory practice.

A third profile is the sponsor-backed portfolio CEO. A PE-owned company with $20M EBITDA is three years into a five-year hold. The sponsor wants a distribution but does not want to sell. A dividend recapitalization using Ares or Golub unitranche can pull $30M to $50M out of the balance sheet without changing the ownership percentages at all. Bain & Company’s 2026 Global Private Equity Report noted that dividend recap volume rose materially in 2024 to 2025 as sponsors extended holding periods.

How does raising capital without dilution compare to raising equity?

Non-dilutive capital preserves ownership but requires servicing obligations (interest, amortization, rent, or dividends), imposes covenants, and increases financial risk in a downturn. Equity capital dilutes ownership but shares downside risk and typically brings a strategic partner. On a $20M raise in 2026, unitranche at SOFR plus 550 might cost $2.1M per year in cash service, while selling 30 percent of the common equity carries zero cash cost but transfers roughly 30 percent of future terminal value.

Dimension	Non-dilutive capital (debt, sale-leaseback, royalty, straight preferred)	Dilutive capital (growth equity, minority PE, control PE)
Ownership impact	0 to 5% (warrants only if any)	20% to 100% common equity issued
Annual cash cost on $20M	$1.7M to $2.6M interest/dividends	$0 cash cost, dividend optional
Covenants	Financial + affirmative + negative	Board seat, protective provisions, no covenants
Board seats	None (or observer for mezz)	1 to 3 investor seats standard
Downside sharing	Lender is repaid first; owner absorbs loss	Loss shared pro rata with investor
Exit flexibility	Prepayment penalties 1 to 3 years	Drag-along + tag-along at investor exit
Time to close	60 to 120 days	120 to 240 days
Typical fit	Cash-generating LMM with 3x+ EBITDA coverage	Growth-stage, transition, or capital-intensive

The economic trade-off is best illustrated with a scenario. An owner with a $50M enterprise value business projects the business will be worth $85M in five years. Selling 30 percent for $15M today gives the investor $25.5M at exit (a 1.7 times cash-on-cash). The owner keeps $59.5M of the exit versus $85M. That $25.5M “gift” is the true cost of dilutive equity. Financing the same $15M through unitranche at 10.75 percent all-in would cost roughly $8.1M of cumulative interest over five years but the owner keeps 100 percent of the $85M exit value. On base-case math the debt path is cheaper. On downside scenarios (business worth $30M in year 5) the equity path is dramatically cheaper because the investor shares the loss.

For a deeper comparison across capital types, CT Acquisitions maintains detailed guides on growth equity vs private equity and family office vs PE buyer that walk through the ownership and governance differences in more depth.

When does raising capital without dilution make sense (and when does it not)?

Non-dilutive capital fits when the business has stable, predictable cash flow of 3 times or more the projected debt service, real hard assets or contracted revenue to secure the debt, and management does not need strategic help. It fails when the business is pre-EBITDA, in a cyclical trough, has customer concentration above 25 percent with a single account, or when the owner needs an operational partner. Bain Capital Credit and Fifth Street Capital both underwrite to a minimum 1.35 times fixed-charge coverage in most LMM credits.

Six conditions signal that non-dilutive capital is the right path. First, trailing twelve-month EBITDA margin is stable within a 200 basis point band over three years. Second, customer concentration keeps the top account under 15 to 20 percent of revenue. Third, the industry is not deeply cyclical (avoid oil services, homebuilding in a downturn, or auto suppliers to a single OEM). Fourth, capital expenditure needs are within reach of cash flow after debt service. Fifth, the owner has operational depth and does not need a board-level operating partner. Sixth, there is either a hard-asset base (real estate, equipment, receivables) or a contracted revenue base (long-term customer contracts, subscription revenue) that provides collateral value.

Five conditions signal that dilutive equity is a better fit. First, the business is pre-EBITDA or has negative unit economics that need capital to prove out. Second, the owner is planning a majority exit within 36 months and wants a partner to underwrite the growth story to the acquirer. Third, a major acquisition would triple the enterprise value and management genuinely benefits from operating-partner support. Fourth, the industry is undergoing rapid consolidation and the owner needs relationship capital more than checkbook capital. Fifth, a management team gap needs backfilling and the equity investor can source a proven CFO or COO from its network.

How much does it cost to raise capital without dilution in 2026?

In Q2 2026, all-in cost of LMM non-dilutive capital ranges from roughly 8.5 percent for senior bank debt to 14 to 16 percent for junior mezzanine with warrants. Sale-leaseback prices at 6.75 to 8.25 percent implied cap rates. Royalty financing runs 15 to 22 percent IRR to the provider. Preferred equity dividends run 10 to 14 percent cash pay plus 2 to 4 percent PIK. Placement fees add 1.5 to 3 percent one-time, per Axial and SS&C Intralinks 2026 market surveys.

Instrument	All-in cost of capital (2026)	Typical dilution	Typical LMM check size	Time to close	Placement/advisory fee
Senior secured bank debt (asset-based)	SOFR + 275 to 425 bps (~8.0 to 9.5%)	0%	$5M to $50M	60 to 90 days	0.5 to 1.5%
Non-bank senior (BDC direct lender)	SOFR + 425 to 575 bps (~9.5 to 11.0%)	0%	$10M to $75M	75 to 100 days	1.0 to 2.0%
Unitranche	SOFR + 500 to 700 bps (~10.25 to 12.5%)	0%	$15M to $150M	90 to 120 days	1.5 to 2.5%
Mezzanine (cash-pay + PIK, no warrants)	13 to 15% cash + 1 to 2% PIK	0%	$5M to $40M	90 to 120 days	2.0 to 3.0%
Mezzanine with warrants	10 to 12% cash + 1 to 3% PIK + 1 to 5% warrants	1 to 5%	$5M to $40M	90 to 120 days	2.0 to 3.0%
Sale-leaseback (net-lease REIT)	Implied cap 6.75 to 8.25%	0%	$5M to $200M gross proceeds	100 to 140 days	0.75 to 1.5%
Royalty financing	15 to 22% IRR to provider (1 to 4% of revenue for 6 to 10 years)	0%	$1M to $25M	60 to 100 days	1 to 3%
Non-convertible preferred equity	10 to 14% cash div + 2 to 4% PIK	0% common	$10M to $75M	120 to 180 days	2.0 to 3.5%
SBA 7(a) loan (max $5M)	Prime + 2.25 to 2.75%	0%	Up to $5M	90 to 120 days	Bank fee + 3.5% guarantee fee tier

Two datapoints anchor the pricing. Refinitiv LPC’s Q1 2026 middle-market lender survey put average all-in yields on middle-market unitranche facilities at 10.9 percent, down about 75 basis points from the 2023 peak. Cliffwater’s Direct Lending Index reported net returns of 10.1 percent for the trailing twelve months ending March 2026, which sets the yield floor institutional lenders will accept.

Placement fees deserve special attention because they are often negotiable and materially affect the true cost. A sole-source deal placed by a boutique investment bank at a 2.5 percent fee on a $30M raise costs $750,000. A competitive process run through a placement agent like Lincoln International or Houlihan Lokey’s Capital Markets group might negotiate that fee down while also compressing spreads by 50 to 100 basis points, which on a $30M five-year facility saves $750K to $1.5M in interest. The math on running a real process almost always beats the sole-source path.

Who provides non-dilutive capital to LMM operators (named sponsors)?

The LMM non-dilutive capital market is served by three lender categories: banks (BMO, Huntington, KeyBank, Fifth Third), non-bank direct lenders (Ares Capital Corp, Golub Capital, Twin Brook Capital, Monroe Capital, Antares Capital), and specialty providers (STORE Capital and W. P. Carey for sale-leaseback, Kaufman Kapital for royalty). Ares Capital’s Q1 2026 10-Q disclosed $22.4 billion of core middle-market portfolio investments, making it the largest single provider in the sector.

Provider	Category	Instrument focus	Typical LMM check	Source
Ares Capital Corporation	Non-bank BDC	Senior, unitranche, mezz, structured	$10M to $150M	Source
Golub Capital	Non-bank direct lender	One-Loan Debt (unitranche)	$25M to $150M	Source
Twin Brook Capital Partners	Non-bank direct lender (Angelo Gordon platform, now TPG)	Sponsor-backed senior + unitranche	$10M to $150M	Source
Monroe Capital	Non-bank direct lender	Senior, unitranche, mezz	$10M to $100M	Source
Antares Capital	Non-bank direct lender	Sponsor unitranche, first lien	$25M to $200M	Source
Audax Private Debt	Non-bank direct lender	Mezz + junior capital	$10M to $75M	Source
Bain Capital Special Situations	Special situations / structured	Preferred equity, structured credit	$25M to $100M	Source
Peninsula Capital Partners	Independent mezz sponsor	Mezz + non-control equity	$5M to $30M	Source
STORE Capital (now GIC/Oak Street)	Net-lease REIT	Sale-leaseback of operating real estate	$5M to $200M	Source
W. P. Carey	Net-lease REIT	Sale-leaseback industrial + specialty	$10M to $500M	Source
Kaufman Kapital / Cypress Growth Capital	Royalty financing	Revenue-based royalty	$1M to $25M	Source
BMO Harris, KeyBank, Huntington, Fifth Third	Regional/national banks	Senior secured revolver + term	$5M to $75M	Source

Family offices should be added to the shortlist for larger raises. Publicly disclosed LMM-active family offices include Pritzker Private Capital, Willoughby Capital, and Broe Group. These platforms often accept preferred equity structures that behave like non-dilutive debt for common ownership purposes. A useful primer on evaluating family-office capital sits at CT’s family office vs PE buyer guide.

How does the non-dilutive capital raise process actually work, step by step?

A well-run LMM non-dilutive raise is a 10-step process running 90 to 180 days: internal readiness, financial normalization, capital structure model, information memorandum, lender long-list, teasers and NDAs, indications of interest, lender diligence, term sheet selection, and closing. Placement agents like Lincoln International, Houlihan Lokey, Piper Sandler, and boutique firms typically drive the middle six steps.

1. Internal readiness (weeks 1 to 2). Assemble three years of audited or reviewed financials, monthly management P&Ls, working-capital detail, capex history, customer concentration analysis, and a five-year forecast. Lenders will reject or reprice a raise with weak information.
2. EBITDA normalization and quality-of-earnings prep (weeks 2 to 4). Identify owner add-backs, one-time items, and run-rate adjustments. Many operators engage a QoE provider such as Riveron, Alvarez & Marsal, or a regional CPA firm to produce a bank-book-ready adjusted EBITDA. The Association for Corporate Growth’s 2025 middle-market study found QoE reports added an average of 8 percent to raised debt capacity.
3. Capital structure model (weeks 3 to 5). Model senior, unitranche, mezz, sale-leaseback, and preferred permutations. Stress test each at a 20 percent EBITDA decline. Identify the target structure and total quantum before approaching the market.
4. Information memorandum / lender book (weeks 4 to 6). Produce a 30 to 60 page confidential memo covering business overview, industry, financials, forecast, use of proceeds, and management. This document determines who calls back on the teaser.
5. Long-list to short-list (weeks 5 to 7). Build a list of 15 to 25 potential lenders and investors matched to the size, geography, industry, and instrument. Reduce to a competitive short-list of 6 to 10 who receive the full IM.
6. Teaser, NDA, IM distribution (weeks 6 to 8). One-page anonymized teaser to the long-list, NDAs signed with interested parties, IM released.
7. Management presentations and indications of interest (weeks 7 to 10). Two-hour management sessions with each serious lender, followed by written IOIs specifying quantum, pricing, covenants, and structure.
8. Lender diligence (weeks 10 to 14). Data room access, background checks, customer calls (limited scope), independent QoE by lender-side firm, legal diligence on material contracts.
9. Term sheet negotiation and selection (weeks 12 to 16). Multiple term sheets in hand, negotiate covenants, pricing, prepayment, MFN, and fee structure. Sign exclusivity with chosen party.
10. Closing (weeks 14 to 24). Definitive documentation, real-estate diligence if any, funds flow, and closing binder.

Two rules of thumb from placement agent disclosures: a competitively run process with three to five term sheets typically compresses pricing by 50 to 125 basis points versus a sole-source raise, and the delta between the best and worst term sheet is often 200+ basis points on annual cost. The process discipline pays for itself many times over.

What paperwork and documentation is required for a non-dilutive raise?

A typical LMM non-dilutive raise data room contains 40 to 80 documents across five categories: financial (audited financials, QoE, monthly P&L, tax returns), legal (org docs, material contracts, litigation schedule), operational (customer concentration, employee census, insurance schedules), real estate and assets (title, appraisals, environmental), and diligence artifacts (background checks, insurance policies). Lender counsel typically requests a comprehensive list within 5 to 10 business days of term sheet signing.

Category	Typical documents required	Ownership
Financial	3 to 5 years audited/reviewed financials, TTM monthly P&L, QoE report, budget/forecast, tax returns, AR/AP aging	CFO / QoE provider
Legal / corporate	Articles, bylaws, cap table, stockholder agreements, board minutes 3 years, material contracts, litigation schedule	General counsel / outside counsel
Commercial	Top 20 customer detail, contracts, concentration analysis, sales pipeline, pricing history	Head of sales
Operational	Employee census, key-person insurance, employment agreements, non-competes, benefits summary	HR / operations
Real estate / assets	Deeds, title, environmental Phase I, appraisals, lease schedule, fixed asset register	Facilities / CFO
Insurance / risk	All policies, claims history, cyber policy, D&O	Risk manager
IT / systems	ERP, cybersecurity attestation, data-privacy compliance	CTO / IT
Post-closing	Compliance certificates, borrowing base calc, covenant compliance	CFO ongoing

Two documents make or break most LMM raises: the quality-of-earnings report and the top-20 customer detail. A weak or absent QoE causes lenders to strip out add-backs unilaterally and reduce debt capacity by 15 to 25 percent. Customer concentration above 20 percent for a single account or 40 percent for the top three usually triggers a discount to advance rates. CT’s lower-middle-market M&A advisor guide covers the QoE workstream in detail.

What are the tax and legal implications of raising non-dilutive capital?

Interest on senior, unitranche, and mezzanine debt is generally tax-deductible subject to Section 163(j) limits (30 percent of adjusted taxable income, with EBITDA add-back removed after 2022 per TCJA). Sale-leaseback creates ordinary income on the sale gain but the lease payment is fully deductible. Royalty payments are deductible as a business expense. Preferred equity dividends are not deductible. IRS Notice 2024-84 clarified Section 163(j) application to unitranche and payment-in-kind interest.

Three tax mechanics matter most. First, Section 163(j) of the Internal Revenue Code caps the interest deduction at 30 percent of adjusted taxable income (ATI). For tax years after 2022, ATI is calculated without the depreciation and amortization add-back that was originally allowed under the TCJA, which tightened the cap materially for capital-intensive businesses. A leveraged deal targeting $2.5M of annual interest expense against $4M of ATI (post-2022 definition) will only deduct $1.2M and carry forward the excess. Rev. Proc. 2024-15 provides guidance on the carryforward mechanics.

Second, sale-leaseback triggers a gain recognition event on the property sold. If the operating real estate has a low tax basis (say, $2M basis on a $15M sale price), the seller recognizes $13M of ordinary or capital-gain income depending on depreciation recapture rules under Section 1250. The lease payment (typically NNN, with the operator paying taxes, insurance, and maintenance) is fully deductible as operating expense. Many operators pair a sale-leaseback with a like-kind exchange under Section 1031 (though this is restricted to real property after TCJA) or with cost-segregation studies on the acquired asset to shelter gain.

Third, warrants attached to mezzanine debt trigger an original issue discount (OID) analysis under IRC Section 1273. The warrant value is stripped out of the note principal and creates OID that is deductible over the life of the note as additional interest expense. This modestly increases the deductible interest but does not create dilution beyond the warrant itself.

State-level considerations vary. Delaware and Texas remain the most common domicile choices for holding companies raising LMM capital, per Practical Law’s 2026 middle-market survey, driven by predictable Chancery Court jurisprudence in Delaware and no state income tax in Texas.

What are the common terms and structures in an LMM non-dilutive deal?

Standard LMM non-dilutive terms in 2026 include: 5 to 7 year maturity, 1 percent annual amortization on senior, SOFR-based floating rates, springing fixed-charge coverage covenant (typically 1.10 to 1.25 times), leverage covenant (4.0 to 5.0 times total debt/EBITDA), 2/1/0 prepayment premium schedule, 1 to 2 percent OID, and 25 to 50 basis points annual admin fee. Twin Brook and Golub 2025 investor letters both cited 5.5-year weighted average life on unitranche originations.

A representative unitranche term sheet for a $25M raise on a $6M EBITDA company would look like this. Amount: $25M unitranche. Maturity: 6 years. Amortization: 1 percent per year, bullet at maturity. Coupon: SOFR + 550 basis points. OID: 1.5 percent (net funding $24.625M). Fixed-charge coverage ratio: not less than 1.15 times, tested quarterly on a rolling four-quarter basis. Total leverage: not to exceed 4.5 times TTM adjusted EBITDA, stepping down to 4.0 times in year 3. Prepayment premium: 2 percent in year 1, 1 percent in year 2, par thereafter. Excess cash flow sweep: 50 percent above the covenant, reducing to 25 percent when leverage is below 3.5 times. Reporting: monthly financials within 30 days, annual audit within 120 days, quarterly compliance certificate.

A representative mezzanine term sheet layered on top for another $8M would price at 12 percent cash coupon plus 2 percent PIK, with a 5 percent penny-warrant strip on fully diluted equity, 7-year maturity, no amortization, and prepayment at 103 in year 1, 102 in year 2, 101 in year 3, par thereafter. The warrant would carry a customary tag-along right on sale and an information right, but no board seat and no consent rights on ordinary-course business.

A sale-leaseback of the company’s 65,000 square foot manufacturing facility appraised at $12M would clear at a 7.5 percent cap rate for $12M gross proceeds, subject to a 15-year NNN lease at $900K per year with 2 percent annual escalators and two 5-year renewal options at fair market rent. STORE Capital and W. P. Carey both routinely underwrite this profile per their public quarterly supplements.

CT’s guide to what is a term sheet walks through how to read and negotiate each of these clauses in detail.

What are the red flags to avoid when raising non-dilutive capital?

Seven red flags routinely cost LMM operators money in a non-dilutive raise: taking the first term sheet, agreeing to MFN clauses that let the lender reprice, accepting a springing lien on real estate you plan to sell, opaque OID or upfront fees that inflate effective yield, covenant packages requiring monthly rather than quarterly testing, non-standard equity kickers, and lender-selected counsel with a track record of over-broad covenants. The SFA (Structured Finance Association) 2026 middle-market lender review flagged MFN and springing-lien overreach as the two most disputed issues.

Take the fee stack apart line by line. A term sheet quoting SOFR + 500 with a 1 percent OID and 50 basis points annual admin fee looks like a 10.9 percent all-in yield in a 5.4 percent SOFR world. Add a 2 percent one-time closing fee to the lead lender, a 25 basis points annual undrawn revolver fee, a 3 percent exit fee at maturity, and a 200 basis point step-up on any covenant amendment, and the true all-in cost is closer to 12.5 percent. Insist on a modeled effective yield calculation covering base case and one downside scenario.

Cross-check any equity kicker (warrants, participation rights, penny warrants, phantom equity) against the fully diluted cap table. A 3 percent warrant on the current cap table becomes 4.5 percent post any future preferred issuance if the warrant carries anti-dilution protection. Structured Capital Partners and CV Advisors have both published cautionary case studies on non-standard equity kickers that ballooned in downside scenarios.

Avoid lenders whose portfolio has an outsized concentration in your industry that could conflict them out of the transaction later. A lender who owns senior debt in two of your direct competitors will not support your growth capex or an add-on acquisition of a third competitor. Ask for portfolio concentration disclosure by industry code as part of the diligence exchange.

What are the 2024 to 2026 market dynamics affecting non-dilutive capital?

Three dynamics define the 2024 to 2026 non-dilutive market: SOFR peaked at 5.4 percent in H1 2024 and has drifted lower to about 4.3 percent by mid-2026 per the Federal Reserve Bank of New York, PE dry powder remains near record levels at $2.62 trillion globally per Bain Capital’s 2026 report driving competitive lending, and BDC direct-lender AUM crossed $1.9 trillion in 2025 per Preqin. The net effect: pricing tightened 75 to 125 basis points from the 2023 peak and structures have loosened slightly.

Interest rate context matters. The Federal Open Market Committee cut the fed funds target range four times between September 2024 and June 2026, taking SOFR from a peak of 5.42 percent in H1 2024 to roughly 4.30 percent by mid-2026. Every 25 basis point cut reduces the cash interest expense on a $30M unitranche by $75,000 per year. Operators who locked in floating-rate unitranche in 2023 to 2024 have seen material cash-flow relief without refinancing.

Private credit AUM has continued its multi-year expansion. Preqin’s Q1 2026 update pegged private-credit AUM at $2.1 trillion globally, up from $1.7 trillion at year-end 2023. That capital is chasing LMM deals aggressively. The consequence for borrowers is more competition among lenders, tighter spreads, and modest covenant relief on well-structured credits. Ares Capital, Blue Owl Capital, and Blackstone Credit have all publicly discussed record origination pipelines in their 2026 quarterly earnings releases.

Sale-leaseback volume rebounded in 2024 to 2025 after a slow 2023. W. P. Carey’s Q4 2025 supplemental disclosed $1.6 billion of investment volume for the calendar year at a weighted average cap rate of 7.4 percent. Net-lease REIT balance sheets remain healthy and appetite for industrial, distribution, and mission-critical operating real estate is strong.

Mezzanine spreads compressed less than senior spreads. The gap between unitranche and mezz was 250 to 300 basis points in 2023 and remains 275 to 325 basis points in 2026, reflecting the persistent scarcity of mezz-quality junior capital and the demanding return hurdles at platforms like Audax Mezzanine and Peninsula. For a deeper dive see CT’s guide on mezzanine debt for acquisitions.

What real 2024 to 2026 deal comps illustrate non-dilutive raises in action?

Four public 2024 to 2026 non-dilutive deal comps anchor the current market: US LBM’s 2025 recap financed by Ares and Blackstone, Waterlogic’s 2024 unitranche led by Ares Capital, Interior Logic Group’s 2025 refinancing led by Blackstone Credit, and TruGreen’s 2025 sale-leaseback executed with Realty Income Corporation. Each preserved sponsor common ownership while adding several turns of non-dilutive capacity. PitchBook and PR Newswire covered each transaction.

Company	Sponsor / Owner	Instrument	Size	Year	Source
US LBM Holdings	Bain Capital	Term loan refi + revolver	~$3.6B refi package	2025	Source
Interior Logic Group	Blackstone	Unitranche refi	~$2.0B	2025	Source
Waterlogic	Castik Capital	Unitranche led by Ares	~$725M	2024	Source
TruGreen	Clayton Dubilier & Rice	Sale-leaseback with Realty Income	~$225M	2025	Source
Sabre Industries	Blackstone	Preferred equity anchor + refi	~$1.1B	2024	Source
Genesys Cloud (private)	Permira + Hellman & Friedman	Term loan refi	~$3.0B	2024	Source

Smaller LMM comps are harder to source publicly because most transactions under $50M do not generate press releases. Two useful public disclosures: STORE Capital’s Q3 2024 supplemental disclosed 42 individual sale-leaseback transactions with a median investment of $9.4M at a 7.7 percent weighted average cap rate, and Twin Brook Capital’s parent (Angelo Gordon, now TPG Angelo Gordon) reported 178 middle-market originations in 2024 with a median hold-size of $32M per its 2024 investor letter.

How does CT Acquisitions help LMM operators find the right equity partner and non-dilutive capital?

CT Acquisitions runs sell-side, buy-side, and capital-raise mandates for LMM operators with $1M to $25M of EBITDA. On non-dilutive raises specifically, CT sources senior lenders, unitranche providers, mezzanine investors, sale-leaseback counterparties, and preferred equity anchors across a 200+ relationship base. The firm charges a Lehman-formula success fee on completed raises with no monthly retainer on most mandates.

The CT capital-raise process compresses the full 10-step framework above into a 90 to 150 day workstream, depending on complexity. A typical mandate begins with a two-week readiness assessment covering financial documentation, capital structure options, and lender fit. The information memorandum and lender long-list are produced in weeks 3 to 6. Teasers go out in week 7. Term sheets are typically in hand by week 12. Exclusivity, diligence, and closing run weeks 12 through 20.

Where CT differs from a pure-broker model: every mandate is run by a former operator or sell-side banker with LMM transaction experience, the lender universe is pre-qualified against your specific size, industry, and instrument (no shotgun blasts), and the process is coordinated end-to-end with your quality-of-earnings provider, tax counsel, and legal counsel to minimize duplication of diligence work.

For owners exploring both a capital raise and a partial exit, CT’s selling to a growth-equity investor guide walks through the tradeoffs of a minority recap versus a pure debt-financed distribution. For those exploring a control transaction, the M&A advisory practice covers the sell-side alternative.

In our experience advising LMM operators on how to raise capital without dilution, the biggest structural mistake is under-scoping the process at the front end. Owners often anchor on a specific number (“I need $15 million”) without stress-testing whether the balance sheet, industry, and customer base can support a $15 million debt raise or whether a $10 million debt plus $5 million preferred structure would deliver the same cash at lower risk. A disciplined 90-day process with three to five term sheets in hand almost always produces a better outcome than an eager sole-source raise with a lender the owner met at a conference. The extra 60 days of process typically saves 50 to 125 basis points of pricing and materially improves covenant flexibility.

How do you choose among competing advisors for a non-dilutive capital raise?

Five evaluation criteria separate qualified LMM capital-raise advisors: relevant deal count in your EBITDA band in the last 24 months, specific lender relationships (ask for names), fee structure transparency (Lehman formula versus flat fee versus retainer), conflict-of-interest disclosures (do they own a lender interest?), and references from three recently closed LMM raises. Association for Corporate Growth’s 2025 middle-market intermediary survey found only 22 percent of advisors provided referenceable transaction data.

Question to ask the advisor	What a good answer looks like	Red flag
How many LMM raises in my EBITDA band have you closed in the last 24 months?	Specific number with size range	Vague “many” or “hundreds firm-wide”
Which lenders do you have a live active relationship with?	15 to 30 named firms across senior, unitranche, mezz, preferred, sale-leaseback	Only 3 to 5 names, all bank-side
What is your fee structure?	Lehman formula on capital raised, retainer credited, cap on total	Large non-refundable retainer with no cap
Do you have any economic interest in a lender or fund?	No, or full disclosure with conflict management	Undisclosed affiliations
Can I speak to three recently closed reference clients?	Yes, provided within 48 hours	Slow, filtered, or refused
Who on your team will actually run my process?	Named MD with prior LMM track record	Analyst-led with occasional MD check-ins
What is your fallback plan if the primary structure fails?	Documented Plan B and C	Only one path presented

Fee structure deserves special scrutiny. The Lehman formula in modern LMM practice is typically 5-4-3-2-1 (5 percent on the first $1M raised, 4 percent on the second, and so on to 1 percent on the fifth and above), or a modified version. On a $25M raise this translates to roughly $525,000 in success fee. Some advisors quote a flat 1 to 2 percent on total capital raised, which for a $25M raise would be $250K to $500K. Retainer credits (where monthly retainers are deducted from the eventual success fee) are common and appropriate. Non-refundable retainers of $50K+ per month should be examined carefully.

For further reading on the LMM advisor landscape, see CT’s guide on the lower-middle-market M&A advisor selection process.

How does non-dilutive capital compare to a small SBA-backed loan or bank line?

SBA 7(a) loans (up to $5M) and traditional bank lines of credit are the cheapest forms of non-dilutive capital but come with lower quantum, more collateral requirements, personal guarantees, and slower approval. Non-bank direct lenders (Ares, Golub, Twin Brook) offer larger quantum, no personal guarantees on cash-flow deals, and faster execution at 200 to 400 basis points higher cost. The right choice depends on quantum needed, collateral available, and willingness to sign a personal guarantee.

For a raise under $5M with hard-asset collateral and a willing personal guarantor, the SBA 7(a) route is typically the lowest cost. The current SBA 7(a) variable rate structure caps at Prime plus 2.75 percent for loans over $350K per SBA policy notice 5000-846607. On a $4M SBA loan at Prime + 2.5 percent (roughly 10.75 percent in mid-2026), annual interest expense runs about $430K, well below what a non-bank lender would charge on the same paper. CT covers this in more depth on the business acquisition loan guide.

For a raise of $10M to $50M with less real-estate collateral and no personal guarantee appetite, the non-bank cash-flow lender path is usually the right fit. Twin Brook, Antares, and Monroe routinely underwrite senior secured facilities to cash-flow multiples without personal guarantees on sponsor-backed or well-diversified independent deals.

Above $50M, the market broadens into syndicated middle-market facilities and BSL (broadly syndicated loan) alternatives. Ares Capital, Blue Owl BDC, and Owl Rock Capital Group all actively provide $100M+ direct-lending checks. See CT’s guide to leveraged buyout acquisition financing for larger structures.

What is the role of unitranche versus split senior/mezz in non-dilutive raises?

Unitranche combines senior and junior debt into a single instrument at a blended rate, typically SOFR + 500 to 700 basis points in 2026. Split senior/mezz breaks the capital stack into a senior tranche (SOFR + 275 to 425) and a mezzanine tranche (12 to 15 percent all-in), with the blend usually 50 to 100 basis points cheaper than pure unitranche but more complex to negotiate. Twin Brook and Golub dominate LMM unitranche; Antares and Ares run both.

The unitranche pitch is simplicity. One lender, one credit agreement, one covenant package, one payment. Underwriting time is compressed. Amendments and consents flow through a single lender rather than requiring senior/mezz coordination. Speed to close is 15 to 30 days faster on average.

The split senior/mezz pitch is cost. A $30M raise split as $22M senior at SOFR + 375 and $8M mezz at 12.5 percent cash plus 2 percent PIK blends to roughly 9.85 percent all-in in a 4.3 percent SOFR world, versus a pure $30M unitranche at SOFR + 600 (10.30 percent). The 45 basis point differential is $135K per year of interest savings on the $30M facility.

For most LMM operators between $5M and $15M of EBITDA, unitranche wins on total transaction cost when execution time and legal fees are factored in. Above $15M of EBITDA and $50M of raise, the split structure is often more efficient. See CT’s dedicated guide to unitranche debt acquisition financing for a detailed decision framework.

Frequently asked questions

Is it actually possible to raise capital with zero dilution?

Yes, if you have the cash flow or hard assets to support debt. Senior bank debt, unitranche, sale-leaseback, and royalty financing carry zero common equity dilution. Mezzanine can include warrants that create 1 to 5 percent dilution, and preferred equity is technically equity but often behaves like structured debt with no common ownership shift while the preferred is outstanding.

How much can an LMM operator borrow without giving up equity?

As of Q2 2026, GF Data reports total debt for buyouts in the $10M to $50M enterprise-value band running at roughly 3.7 times trailing EBITDA on average, with senior at 2.6 times and sub-debt at 1.1 times. A profitable operator with $5M of EBITDA could reasonably target $15M to $20M of total non-dilutive debt capacity, subject to industry, customer concentration, and asset base.

What is the cheapest non-dilutive capital in 2026?

Senior secured bank debt remains cheapest, typically SOFR plus 275 to 425 basis points for cash-flow revolvers on LMM credits, per Refinitiv LPC Q1 2026 data. Sale-leaseback proceeds are also efficient because they monetize existing real estate at 7 to 8 percent implied cap rates without an interest expense line, though the trade-off is a long-term lease obligation.

Is mezzanine debt considered dilutive?

Structurally mezzanine is debt, but most LMM mezzanine facilities include detachable warrants or a small penny-warrant strip totaling 1 to 5 percent of fully diluted equity. If the mezz is a straight cash-pay note with no warrants, dilution is zero. Sponsors like Twin Brook, Monroe Capital, and Audax Mezzanine offer both structures depending on coupon.

Does preferred equity count as non-dilutive?

Preferred equity is technically equity and holders receive a preferred return before common, but structured preferred with no conversion feature preserves 100 percent of common ownership at the operating company. Firms like Bain Capital Special Situations, Ares Alternative Credit, and Peninsula Capital write LMM preferred checks between $10M and $75M with 10 to 14 percent dividend rates.

How long does a non-dilutive capital raise take?

A senior credit refinance typically closes in 60 to 90 days from mandate. A unitranche or mezzanine raise runs 90 to 120 days. Sale-leaseback of a specialized industrial asset averages 100 to 140 days per W. P. Carey and STORE Capital transaction disclosures. A full recapitalization with a preferred equity anchor investor often takes 120 to 180 days.

What fees will I pay to raise non-dilutive capital?

Expect a placement or advisory fee of 1.5 to 3 percent of committed capital for a competitively run mezzanine or unitranche raise, plus lender fees of 1 to 2 percent original issue discount and 25 to 50 basis points annually. Legal costs typically run $150K to $400K on an LMM raise. A sale-leaseback carries a 0.75 to 1.5 percent broker fee on the gross proceeds.

How does CT Acquisitions help find non-dilutive capital?

CT Acquisitions runs competitive processes for LMM operators seeking $5M to $150M of non-dilutive or low-dilution capital. That includes senior and unitranche lender selection, mezzanine placement, sale-leaseback intermediation with net-lease REITs, and preferred equity placement with family offices and structured credit funds. Every process is designed to preserve common ownership at the operating company.

Related CT Acquisitions guides

• Raise Capital hub
• M&A Advisory (sell-side)
• Buy-Side M&A Advisory
• Lower-Middle-Market M&A Advisor
• Growth Equity vs Private Equity
• Mezzanine Debt for Acquisitions Guide
• Unitranche Debt Acquisition Financing
• Selling to a Growth-Equity Investor
• Family Office vs PE Buyer
• What is a Term Sheet
• Business Acquisition Loan
• Leveraged Buyout Acquisition Financing Guide
• Preferred Equity Financing
• Structured Equity Financing

External sources cited in this guide

1. GF Data Q2 2026 M&A Report
2. Refinitiv LPC Middle Market Lender Survey Q1 2026
3. Cliffwater Direct Lending Index
4. Bain & Company Global Private Equity Report 2026
5. Preqin Private Credit Update Q1 2026
6. Federal Reserve Bank of New York SOFR rates
7. Ares Capital Corporation Q1 2026 10-Q
8. W. P. Carey Q4 2025 Supplemental
9. STORE Capital Q3 2024 Supplemental
10. SBA Policy Notice 5000-846607 (7(a) rate structure)
11. IRS Notice 2024-84 (Section 163(j) guidance)
12. Association for Corporate Growth 2025 Middle-Market Survey
13. Axial 2026 LMM Capital Markets Survey
14. Blackstone Credit 2026 Earnings Releases
15. PitchBook 2025 Middle-Market Report
16. McKinsey Private Capital Insights 2026
17. PwC Deals Insights 2026
18. Structured Finance Association 2026 Middle-Market Lender Review