In a rapidly evolving private credit landscape, Nova Street Partners is taking a different approach—offering flexible, borrower-centric debt solutions. In this exclusive interview, CAPX CEO Rocky Gor sits down with Dominic Micheli and Nick Flaherty, co-founders of Nova Street Partners, to discuss how the Dallas-based firm is filling a gap in the corporate financing market, why transparency matters, and how they evaluate “good debt risk.”
Watch the full conversation below to learn how Nova Street Partners works with companies seeking capital, tailoring their solutions to each company’s needs, and how they build trust in an increasingly crowded market.
An edited transcript is below.
Interested in learning how CAPX can help your company engage with firms like Nova Street Partners? Get in touch with us here.
Edited Transcript
Rocky Gor: Dominic Micheli and Nick Flaherty from Nova Street Partners—thank you for joining us. Nova Street Partners is a private credit firm based in Dallas, and I thought it would be great to have you both here because you offer a unique approach to private credit. Please tell us a bit about your backgrounds and your firm.
Nick Flaherty: Thanks for having us, Rocky. Nova Street Partners is a small private credit firm that we started in the spring of 2024. We focus on providing growth capital in the form of debt, typically investing between $5 million and $25 million. We’re industry-agnostic and operate with a small, flexible team, which sets us apart from traditional lenders and banks that have more rigid underwriting criteria.
My background includes running a residential mortgage home loan trading fund for ten years. Nova Street Partners was founded by the three of us with capital on our balance sheet, meaning we don’t have external committees or credit teams slowing us down. It’s just the three of us deciding where to invest and how best to support growing companies.
Dominic Micheli: Thanks, Rocky. My background is in private credit at Goldman Sachs, where I spent several years before joining forces with Nick and our third partner to start Nova Street Partners. Our approach prioritizes flexibility for our borrowers. We deploy capital across various industries, excluding real estate and oil and gas. We differentiate ourselves by structuring creative financing solutions tailored to each borrower’s needs.
RG: Let’s talk about differentiation. You operate in a space filled with SBICs (Small Business Investment Companies), yet you bring something different to the table. Can you break down how you differentiate yourselves from SBICs regarding transaction type and structure, return requirements, and overall approach?
NF: Absolutely. Our mandate is strictly debt-focused; we do not engage in equity investments like SBICs do. This means we’re not looking for significant upside from equity appreciation—we focus on underwriting downside risk to ensure we’re comfortable with the company’s financials, debt risk, cash flow, growth base and EBITDA going forward. Our primary objective is to identify strong debt risks with reliable downside protections
RG: So your compensation is primarily interest-based rather than relying on equity kickers or warrants, which many SBICs require.
DM: That’s correct. Unlike SBICs that often require 20–30% equity dilution, we don’t mandate such terms. Our focus remains on identifying solid debt investments where we can structure downside protection without relying on equity appreciation. That’s why we don’t see ourselves as direct competitors to SBICs; we cater to a different borrower profile.
RG: You mentioned looking for “good debt risk.” How do you define that? What does the ideal credit profile look like for Nova Street Partners?
DM: One of our strengths is the flexibility of our capital. There isn’t a perfect, middle-of-the-fairway deal for us. We invest across the capital structure, from senior debt to mezzanine debt. An ideal borrower is a U.S.-based company (excluding real estate and oil & gas) with strong collateral, whether asset-based or cash flow-driven. We focus on companies that have grown to a point where banks may struggle to underwrite them due to complexity, industry nuance, or other factors. We take the time to understand these businesses and structure appropriate financing solutions.
RG: Some borrowers resist working with new lenders, preferring to stay with institutions they already know. How do you overcome this challenge?
NF: Our approach is to be incredibly responsive and thorough from the outset. We rarely give an immediate “no”—we prefer to engage, understand the company’s history and needs, and provide feedback. Even if we ultimately pass on an opportunity, we aim to be transparent and timely so companies know where they stand with us. That builds trust quickly, even with borrowers who don’t have prior relationships with us.
RG: Speaking of trust, let’s talk about your process. How do you ensure that when you issue a term sheet, it’s reliable and borrowers can count on it?
DM: Our process is thorough. When a deal is presented, we review every document, ask engaged questions, and communicate openly with brokers and management teams so that we understand the transaction and what the need for capital really is. If we issue a term sheet, it means we’ve done enough diligence to stand behind it. That term sheet will lay out what extra diligence we need to do—whether that be a detailed underwriting process with additional file requests, plans to bring in third-party reviews or approvals, quality of revenue or quality of value requirements… all to get on the same page on how we think about the business. We don’t change terms or back away from deals unless something truly unexpected comes up in diligence. We believe in maintaining strong relationships and a solid market reputation.
NF: Exactly. By the time we issue a term sheet, we are committed to moving forward unless a major, undisclosed risk emerges. That reliability sets us apart.
RG: The market continues to be fragmented, and sourcing quality transactions isn’t easy. How do you source deals?
NF: We cast a wide net—working with bankers, intermediaries, personal networks, and platforms like CAPX. It helps when any of those sources knows us and can speak to our reliability.
RG: There are lots of uncertainties in the current market, from how deals come to market, how they get executed, what comes up in the diligence phase… as well as uncertainty related to who needs capital today (e.g., private equity firms, private companies). Given market uncertainties, what trends are you seeing in deal flow and your interaction with borrowers?
DM: We see a healthy mix of sponsored and non-sponsored transactions. Lately, there’s been a trend toward sponsored deals, which tend to have more polished financials and underwriting items.
NF: I agree that if the company is sponsor-backed, things have been thought through a little more, with a defined go-to-market strategy. With that said, we are equally interested in working with founder-led businesses that may lack formal financial reporting but have strong fundamentals.
DM: In the case where we have a non-sponsored company with strong fundamentals, we look at the relationship as a partnership, and often share our tracking models and financial insights with borrowers—and this is a differentiator from what other lenders typically will do.
RG: The private credit landscape has changed drastically over the last 15 years. Are you using any digital tools to manage your transactions more effectively?
NF: CAPX provides a solution by connecting us with borrowers efficiently. The market is highly fragmented, and without tools to facilitate those connections, it would be much harder to find opportunities that align with our mandate. The way that CAPX filters through deal opportunities for us is extremely valuable, and in order to deliver value back, we try to work through opportunities quickly and determine whether it’s something we can work with.
DM: There are really two parts to this question—there are more and more private credit players out there and also more private companies looking for capital in the current environment. We can look as hard as we want, and we will never find all those people looking for capital, and they aren’t all going to find us. CAPX really does solve that problem because it gets all those parties in one environment and allows those connections to be made.
RG: If a borrower is pitching to you through CAPX, how should they approach the conversation? What information is most helpful to you?
DM: Since we are a smaller platform, borrowers interact directly with decision-makers—there is no larger committee we’re bringing the deal to. Transparency is key. We want to understand both the strengths and risks of a business, so clear financial data, business background, and open communication help us move quickly and reliably.
NF: Agreed: the more data the better; we’re not afraid to roll up our sleeves to digest whatever is provided. Founders are often bullish on their upside potential, which we appreciate, but we also want to hear about their risk factors and how they plan to mitigate them. The more comprehensive the information, the better we can evaluate fit and provide meaningful feedback.
RG: When I talk to CFOs and borrowers, I tell them that lenders are looking in your rear-view mirror: they want to know what that is before you tell them your company is going to grow 3x. They want to know how and why your company got to where it is today.
Importantly, for borrowers, their primary reference point for financing is a bank. How do you talk to them about how you differentiate from banks?
NF: The primary difference between us and banks is how small and nimble we are. There are no committees; nothing is getting passed off from a due diligence team to a credit committee to an investment committee—you speak directly with us to explain where you’ve been, where you’re going, and how you’re going to get there.
By extension, if you’ve got some big red flag, tell us, let’s wrap our arms around it, figure out how to box that potential risk or prior risk in and understand it—and then we can get over it. Banks have a much more layered review process where the person you’re pitching may not want to explain to their boss what happened or why this could happen.
DM: Agreed and to take that a step further, we try to hear out any given investment. We don’t have hard stops like banks do, where if it doesn’t fit specific parameters, then the deal won’t get done. We have a lot of flexibility in what we can invest in. By comparison, we want to understand the historical period and understand exactly what happened.
And then, we try to underwrite what will happen as well. We try to understand what the equity case is, and exactly what management has put in place to succeed, which allows us just to get a little bit more creative, a little bit more flexible with our solutions.
RG: Thank you both for the insights. It’s great to learn more about Nova Street Partners and how you are bringing a fresh approach to private credit.
This version of the transcript has been edited for style and clarity.
