Q&A with Tony Sirianni: Prospect Capital’s Grier Eliasek

The following Q&A is taken from the January 2026 AdvisorHub interview

Tony Sirianni had the chance to sit down with Grier Eliasek, President & COO, Prospect Capital ([email protected]) to talk about the success growing their practice, and the industry in general.

Private credit is crowded right now. Where do you think Prospect Capital fits-and why does it look different than what many advisors hear about in the market?

The simplest way to describe Prospect's competitive differentiation is that we spend our time with real operating companies-the kinds of businesses many advisors actually recognize because they look like the clients advisors already serve.

A lot of private credit capital has piled into the same lanes with giant sized companies. We've stayed focused on the lower middle market, where you can find transactions "away from the herd." That's a very different sourcing and underwriting environment than competing with others for the same handful of bigger, highly intermediated, commoditized deals.

"Away from the herd" sounds good, but how do you actually find these deals?

We tend to see opportunities through three main paths.

First is smaller private equity firms, generally sub-$500 million funds. Those sponsors often aren't as "overbanked," and they're looking for financing providers who can move with conviction and stay for the long haul.

Second is what people call independent or "fundless" sponsors. Many of these groups are led by former operators-people who've actually run businesses-who invest their own capital and bring real, hands-on expertise.

Third is direct company investments, usually sourced through smaller brokers and boutique investment banks. Even when deals are sourced in that way, we still run such opportunities through full institutional-grade due diligence.

Lower middle market is also where you hear, "It's difficult, it's time-consuming." Is that fair?

It's fair-and it's one reason many investors avoid it.

Lower middle market investing is resource-intensive. A deal can take four to 12 months-or longer-from start to close. And one needs significant people resources not just on the origination front. You also need depth in structuring, diligence, monitoring, and exits.

We have roughly 150 professionals on our team which matters because you need real infrastructure to perform at high levels with consistent results. We review over 3,000 opportunities a year and close on less than 1%. That's not a marketing tagline-it's the reality of being disciplined in a segment where the workload is heavy but the risk-adjusted rewards for finding attractive deals can be significant.

So where is everyone else fishing right now?

If you look at the last five years, more than $2 trillion has been raised for private credit and related strategies. A large share of that capital has flowed to the upper end of the middle market-typically companies with more than $50 million of EBITDA.

Here's the imbalance that jumps out. There are roughly 230,000 U.S. middle market companies with EBITDA between $5 million and $150 million. But only around 10,000 such companies reside in the $50 million to $150 million EBITDA band-yet that's where so much capital has concentrated.

So you've got lots of money chasing a smaller slice of the universe, and those companies are often already owned by large private equity firms, with financing that has become commoditized at tight spreads with higher risk.

And your view is the "less crowded" part of the market is actually the bigger pond?

Exactly. Roughly 220,000 companies fall into the $5 million to $50 million EBITDA range. That's a much broader opportunity set-and generally a less competitive one.

We believe the lower middle market can offer lower risk, less competition, and more attractive returns, in part because the ownership dynamics are different than the large PE-backed world, and in part because you can often negotiate better lender protections.

Over the last two decades, Prospect has invested about $24 billion across more than 1,000 companies, and we've leaned more into this lower middle market focus with increasing emphasis in recent years.

Let's translate that for advisors. When you say "different risk profile," what actually changes deal-to-deal?

A lot of the differences show up in the structure-things advisors should care about when they're evaluating downside risk.

For example, leverage: upper middle market deals often use one to two turns more leverage than lower middle market deals.

Then there's earnings quality. In larger deals, you'll often see more reliance on EBITDA addbacks-and that can make "EBITDA" look better on paper than it really is. Down-market, you typically accept fewer addbacks, which tends to mean higher-quality earnings.

And protections matter. In the upper market, many deals are covenant-light. Down-market, you more often see multiple financial covenants-and those covenants can act as early warning signals. Documentation also tends to be stronger in lower middle market deals.

What about "lender-on-lender" risk? Advisors hear that phrase and their eyes glaze over.

It's simpler than it sounds.

In many upper middle market financings, you'll see multiple lenders. That can make return-reducing and risk-enhancing repricings and refinancings easier, because a borrower can play lenders off against one another. Such interplay also creates friction and complexity among lenders in a workout scenario.

In the lower middle market, you far more often have a single lender. That fact substantially reduces the above dynamics-fewer parties, fewer competing agendas, and less "race to the bottom" behavior.

Okay, now the question everyone asks: where does the return come from?

The return is closely tied to contractual pricing and terms.

In the upper middle market, you often see pricing of a low 400 to 450 basis points over SOFR. In the lower middle market, pricing more commonly lands in the 600 to 900 basis point range.

Floors are another big difference. Upper market deals can have low-or no-SOFR floors. In the lower middle market, it's more common to see SOFR floors of 300 basis points or higher, which can be particularly meaningful if rates decline.

And then there's equity optionality. In larger deals, you often see what I'd call "naked loans"-just the debt return as the best base. In lower middle market transactions, you're more likely to structure in not just a debt return but also additional equity-linked upside-warrants or convertibles, for example. That can improve the profile meaningfully-taking unlevered IRRs from something like 12% toward ~20% in some cases-so you're potentially getting equity-like upside while still being anchored by largely debt-like first lien senior secured downside-protected risk.

If an advisor is reading this and thinking, "Fine-but how do I actually engage with Prospect?" what's the answer?

We offer a range of investor-friendly products, including registered options as well as other structures, across several areas: lower middle market strategies (including preferred structures), structured credit, and real estate credit.

But beyond product, we spend a lot of time on advisor support-education around private credit, tax efficiency, and generational wealth transfer.

And there's another piece advisors sometimes overlook: we source investments from many of the same business owners that advisors work with. That can create real opportunities for collaboration-not only on the investment side, but in building relationships where the advisor and our team can be aligned in supporting the underlying businesses.

Advisors who want to learn more can contact me anytime at [email protected]. Thank you.