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Technology has impacted so many areas of lending but one niche that has remained a manual, human powered process is middle market lending, where deals are typically $5 million to $100 million. These deals have been consummated on the golf course or at expensive dinners after often months of analysis and negotiation. That is not an efficient way to do business in 2025. Enter Arc.
My next guest on the Fintech One-on-One podcast is Don Muir, the CEO and Co-Founder of Arc. Arc is first and foremost a technology company, providing startups and lenders the tools they need to manage their finances. Where Arc shines is in helping companies raise debt capital, they have built one of the most sophisticated systems on the debt markets today to bring borrowers and lenders together to get deals done quickly and easily, even deals in the tens of millions of dollars.
In this podcast you will learn:
- The aha moment that led to the founding of Arc.
- Why banks are not interested in serving the lower middle market.
- Why they launched with a direct lending model.
- How their two-sided debt marketplace works.
- Details of their commercial banking offering.
- How they make lenders decisions easier.
- The range of deal sizes they are doing today.
- What they offer in their cash management platform.
- How the SVB collapse has impacted their business.
- How Arc Intelligence uses AI to helps lenders make decisions more efficiently.
- Why they have decided to focus exclusively on debt and not do equity.
- Why demand has been so strong for the last year or more.
- How Don is thinking about Arc long term.
Read a transcription of our conversation below.
FINTECH ONE-ON-ONE PODCAST NO. 517 – DON MUIR
Don Muir: Where technology comes in is you can operate with an efficiency and at a scale that brings down the marginal cost such that you can provide a custom experience to an earlier segment of the market without sacrificing that high-touch, high-value experience with the client. And so we can take the big bank relationship model and deliver it at scale at a substantially earlier segment of the company life cycle. That was the gap in the market. It was that these smaller companies, not SMBs necessarily, but lower middle market. Think millions of revenue, tens of millions in capitalization, delivering them a very high-quality experience in a way that just hasn’t been done before with technology.
Peter Renton: This is the Fintech One-on-One Podcast, the show for fintech enthusiasts looking to better understand the leaders shaping fintech and banking today. My name is Peter Renton, and since 2013, I’ve been conducting in-depth interviews with fintech founders and banking executives.
On the show today, we have Don Muir. He is the CEO and Co-Founder of Arc. Now, Arc is bringing a new approach to raising debt capital for middle-market companies, taking a much more high-tech approach than what has been done previously. We talk about how they do this, in particular, their new AI platform called Arc Intelligence, which I found fascinating. We also discuss their cash management and treasury products, and how they fit in to Arc’s capital management ecosystem. Don also gives his perspective on the state of capital markets in 2025 and much more. Now let’s get on with the show.
Welcome to the podcast, Don.
DM: Thanks for having me on. Pleasure to be here.
PR: Okay. So let’s kick it off by giving listeners a little bit of background. Maybe you could just hit on some of the high points of what you’ve done in your career to date.
DM: I cut my teeth in traditional finance and capital markets. Out of undergrad, I worked in management consulting at a large global shop, and then moved over to late stage investing, working in private equity. I spent a couple of years pursuing my MBA out in California, which is where I found entrepreneurship and ultimately started this company.
PR: Was your MBA focused on entrepreneurship, or did you just get the bug there?
DM: I got the bug there. I spent my entire career working in a traditional linear track pursuing my passion, which was value investing at the time. I went to business school with the intent of going back to the buy side. It was, I think, a couple of years on the West Coast, pulling my head out of the finance bubble on the East Coast in New York, where I realized that there was a lot more available to me than the traditional path. And I really fell in love with the idea of building something from scratch, starting my own business, and disrupting the legacy industry that I participated in prior to my MBA.
PR: Okay. So then, what was the aha moment? The idea you had, you had the bug, but you need an idea that you’re passionate about. What was it that you saw exactly?
DM: I’ve always been passionate about finance. That’s corporate finance and investing. So my dad was a CFO. I grew up …… and wanted to follow in his footsteps in the corporate finance and operations track. And then I found investing well, in the early parts of my career and I thought I wanted to do that for the rest of my life. But the story is I love finance, and I wanted to stay in finance. When I found entrepreneurship and saw what specifically was possible when you apply technology to the traditional financial markets, that was my aha moment. I was on the ground in Palo Alto speaking with other entrepreneurs and realized that they weren’t served by the traditional capital markets ecosystem the same way that their larger, more mature peers that I was accustomed to working with in my prior life. So, I started to develop this early thesis around leveraging technology to move down market and serve these more nascent, high-growth businesses in a way that wasn’t before possible with the traditional model. So, leveraging technology to provide a high value, high touch, customized experience to companies that I saw as being underserved by the incumbents, by the large commercial and investment banks.
PR: Right. Interesting. So then you saw a market. Now, before we get into Arc and all of what you do, let’s take a step back. It feels like this is a problem that could have been solved a long time ago. There’s lots of data out there on startups. The venture capital community has been around for decades. The investment banking community has been around for a long time. Why hadn’t it trickled down to some of the smaller players yet?
DM: They’re not big enough accounts to hit the radar of the banks. The reality is the banks have bureaucratic, bloated cost structures. So they have kind of large armies of employees from analysts and associates to VP to MD. So you just have this bloated operating structure that isn’t conducive to serving small accounts in a high-touch way. And so you have SMEs, forget startups, just think small, medium-sized businesses, the lower middle market included, that are being underserved by banks who aren’t set up to operate at that price point. The accounts are too small. They’d rather serve large global clients, 100 million plus revenue, where they can generate substantial fee income to justify their cost structure. So, where technology comes in, and we’re going to get to this, but where technology comes in is you can operate with an efficiency and at a scale that brings down the marginal cost such that you can provide a custom experience to an earlier segment of the market without sacrificing kind of that high-touch, high-value experience for the client. So, we can take the big bank relationship model and deliver it at scale at a substantially earlier segment of the company life cycle. That was the gap in the market. It was that these smaller companies, not SMBs necessarily, but lower middle market, think millions of revenue, tens of millions in capitalization, delivering them a very high-quality experience in a way that just hasn’t been done before with technology.
PR: I want to get into your suite of products today, but I believe you launched with a revenue-based financing product. Is that correct? And maybe you could talk about why that was the product you launched with and tell us about how that has evolved over time.
DM: The vision remain the same. You look at my seed stage pitch stack; it started with a direct lending model. That’s the revenue financing product you’re referring to. That allowed me to get the wheels turning on the business. That allowed me to raise capital and build a team and deploy capital and build out a first iteration of Arc, and generate sufficient traction to unlock more capital, and unlock the second phase, which is moving to an asset-light marketplace, which is where we are today. The direct lending model, I went out, I raised $150 million debt facility from a large multi-billion dollar credit fund. That process, in its own right, was eye-opening for me. I realized how hard it is to raise debt capital as an under-resourced, lean operation. And we now offer that product as a service to other companies. They don’t have to go through the pain that I went through raising that facility with a 15-person team. So, we went out, raised 150 million bucks, built an underwriting model myself with Excel, and then worked with the Eng team to code that and create this algorithmic underwriting process. We deployed a couple hundred million of capital to early-stage companies out of this facility using an underwriting model and financial API integrations that I built with a small team. It worked great. We were growing like crazy, put out all this capital, and we were collecting it. We built really strong relationships with our first cohort of customers, many of which are still with us today now using the second-gen products across the Arc platform.
PR: Well, maybe let’s just dive into that then. Describe your platform today and how it works.
DM: As you pointed out, we started with the direct lending business. We then replaced that business, so we repaid the debt facility to the lender, and replaced it with a two-sided marketplace. So what the direct lending model afforded was, one, I can now empathize with the originators, with the lenders. I know what it’s like to go through originations, underwriting, funding, and collections, and experiencing that pain firsthand has created a lot of empathy for me and the team and allows us to better serve the supply side of our debt marketplace, meaning the lenders who are now working on our two-sided marketplace. So, we shut down the direct lending model and replaced it with a debt marketplace. That was the launch of Arc Capital Markets in January of 2024. And that’s our hyper-growth product that’s truly unique in this market. It’s bringing together lower middle market borrowers who have limited access to debt capital and hundreds of private credit funds and banks who are looking for opportunities to deploy debt into successful high-performing credit quality businesses. Our other core product is commercial banking. And so, we have a digitally native cash management platform that allows the CFOs, CEOs, and finance teams of these companies to manage their everyday banking experience. Think ACH, wires, spend management, all in one place, and then put their idle cash on autopilot. So, maximize yield and safety on excess cash that they’re not using for everyday finances.
PR: Okay. So I want to dig into each of those areas here, but let’s start with the debt marketplace, and maybe you can talk about how it operates because I’m curious, you’ve obviously got a whole bunch of different companies coming. You’ve got a bunch of different lenders. Everyone’s going to have different expectations as far as price, as far as underwriting and how you work with a whole bunch of different credit funds that are going to each have their own way they want to measure, underwrite the companies that are coming. How are you matching those two?
DM: I think of Arc as a two-sided B2B marketplace. You have the demand side, where you have thousands of banking clients. These are companies, predominantly growth companies, so companies that are growing rapidly, who may or may not need debt capital, but they manage their everyday finances with Arc, and they use our banking software on a daily basis to run their company. On the supply side, you have hundreds of bank and non-bank lenders who, to your point, have slight nuances to their credit box. Some offer loans to software companies exclusively in the five to 50 million revenue range. Others offer asset-backed debt facilities to originators and specialty finance firms. And so, as we grow this lender marketplace, our Arc credit box, meaning the types of loans we can offer to our clients, simultaneously expands. So you think about Arc’s role in making this market. Well, our credit box is as big as the lender universe that we have onboarded to the platform, meaning the more lenders that we work with, the more types of companies that we can serve. And what really brings it all together is the technology platform, right? It’s the infrastructure that is the connective tissue between the borrowers and lenders that allows us to programmatically place a given company with a given lender to effectuate a debt transaction.
PR: These lenders want to do their own due diligence, right? On the businesses that are on your platform. Obviously, you probably provide a detailed data room and what have you, but I imagine, again, some of their due diligence is going to be different. How do you manage that?
DM: Exactly. Particularly in the segment of the market that we’re participating in. You have some SMB lending businesses that are focused on algorithmic underwriting or in the consumer space; Affirm and Klarna are probably the cleanest examples where you can use certain variables and automate the lending decision. That’s what we’re trying to do. And quite frankly, as a former investor, fundamental investor, I don’t think that’s ever going to happen, nor do I necessarily want it to. The lenders that are lending on our platform, they’re getting paid, they have their own LPs, they’re getting paid by those LPs to deploy capital meticulously based on the credit box that they’ve agreed to. And their model, the alpha that they generate, the returns that they generate for their LPs, there’s a lot of art, and there’s some science. We can automate the science, and what we can do is make their decisions easier, faster, and more efficient. The way it works is we’ll ingest companies’ financial data. Years of historical financial data, we’ll populate that to an Arc-owned virtual data room. We’ll run analyses against that data set and map it to the lender’s credit box. And so, when we send a loan opportunity to a lender on the supply side of our marketplace, they know it’s a pre-qualified transaction. The model has already scrubbed the financials. The team has already qualified the match for the lender based on precedent transactions, based on financial profiles, and based on credit box fit. And so if the lender is getting a ping from Arc, they know there’s a pre-qualified loan opportunity that fits the unique profile of that lender’s underwriting parameters. The qualification in itself allows the lender to go in with and focus on phase two of the underwrite, which is the financial analysis. Now, this is where they can leverage our latest product, Arc Intelligence, which automates financial analysis for private credit funds. We’re onboarding lenders in real-time and building a custom credit memo that fits the unique credit process of these funds. When you drop in a data room, you’ll output credit metrics the way that you see them, that way that you review them in credit committee. The question for the lender is whether or not they want to do the deal, where Arc adds real value is getting all of the data in a clean, standardized way mapped to the credit metrics that you care about most at your fund.
PR: Right. You’ve got a lot of different debt funds and other banks and non-banks. Some of them are going to have very similar credit boxes. There are two things that can happen here. Obviously, you might have two funds or banks that want to do the same deal. Then, you might have multiple companies on the other side looking for a similar type of investor. Maybe start on the lender side. Do you come into a situation where there are two lenders who want to do the same deal? How do you deal with that?
DM: We’re bringing transparency and liquidity to an otherwise opaque and offline market in a way that’s never been done before. And inherently, that’s going to come with more competition, but that’s healthy. And the reality is these businesses are starved for capital. They’ve relied on traditional banks that have been under pressure really since Dodd-Frank, and in a time when equity is more expensive. And so the clients that we’re serving, the borrowers, the companies, we’re giving them access to capital in a way that they didn’t have access to prior to Arc. And that’s healthy. That’s bringing more liquidity and transparency to a market that’s offline and opaque. The lenders, we’re giving them access to pre-qualified deal flow. And we’re giving them the tools to underwrite more deals more efficiently. So one way to look at it is to say, okay, there’s more competition. The other way is to say, well, there’s more deal flow. And a given team with our AI platform can look at more deals with the same resources. What that’s resulting in is more deals being done by a given lender, even if a given deal has one or two additional bidders than they might’ve had prior.
PR: Right. Okay. So then, what is the range of check sizes we are talking about here? Maybe you could tell us the range and the median that you work with today.
DM: Right. There is an expression: You can drown in a lake that’s an average of a couple of feet deep.
PR: Right.
DM: Like I said before, Arc’s credit box, the deals that we can do are as broad as the lenders that are onboarded to the platform. We have dozens of lower middle market private credit funds that are cutting a couple to $10 million tickets. One to $10 million term loans is one segment. Then we do $10 to $50, and then we do $50 to $100 plus. That’s on the growth cap side for direct lending business. The other core product is asset-backed debt, where we’re working largely with specialty finance and fintech originators to provide them with warehouse and structured finance solutions to fuel their business while reducing capital intensity and optimizing terms. So, asset-backed debt, growth capital, starting at million dollar ticket size. We’re doing deals in the quarter billion plus ZIP code on some of our ABL transactions as well. So it’s a very broad array of deals; the median is about $20 million.
PR: That’s helpful. And that’s the beauty when you’re working with a bunch of different lenders. They’re all going to have different requirements and different check size specialties. So, okay, that’s super interesting. Then maybe let’s dive into the capital management product. It sounds like this has been a newer addition, but potentially, you don’t have to be looking for money to go and get this. Tell us a little bit more about it, and is this the lead gen for the lending business or is it the other way around?
DM: Our cash management platform is comprised of two products. We have our business account with deposit cell with Fifth Third Bank through Stripe. And then we have our treasury management platform to maximize yields on idle cash with funds custody with BNY Mellon Pershing. And Arc is the registered investment advisor, allowing Arc to give cash management advisory solutions to our clients. And so the way to think about the cash management business is, on the business account, you can manage everyday finances. Like I said, unlimited fee-free ACH, wires, check deposits, and automated transfers, all in a couple of clicks in the app. You can issue cards to your team. You can add your bookkeeper. You can have scalable user permissionings for different types of users within your company. That’s your everyday finance experience with your business account with Fifth Third Bank. From there, you set up an auto transfer. We have logic in-app where you can sweep funds to your treasury management platform, which you’re asking about. These funds can be, in a couple of clicks, diversified across the highest yielding, low-risk, fixed-income products like US Treasury bills, money market funds, and insured cash suite products. This allows the CFO suite to diversify their cash across low-risk products to earn an incremental yield on excess cash that isn’t being utilized to manage their everyday banking needs.
PR: Right. Gotcha. Which one is driving the most adoption right now?
DM: Our cash management business has seen explosive growth since the regional bank crisis in 2023 when SVB collapsed. We saw a huge influx of customers. That really hasn’t slowed down since the first quarter of 2023. Our business is something to the tune of 20 to 30 times larger in cash management size today than it was when SVB first went down. So that momentum has continued to grow, and Arc’s customers are getting larger and larger, now working with pre-IPO companies. We have a line of sight to some large public companies who are now moving over their banking operations from traditional banks like JP Morgan Chase to Arc to take advantage of the leading-edge software tools that allow the CFO suite to move much more efficiently.
PR: Are they moving an existing banking relationship and moving everything to Arc, or are they keeping their existing banking relationship and adding on Arc?
DM: Most clients will keep an existing bank relationship. And we encourage that. I think it’s wise for every company to have several bank partners and diversify with multiple banks. The reality is Arc provides embedded diversification within our existing stack. We have, like I said, two bank partners under the hood already. BNY Mellon Pershing, which is the top 10 US global systemically important bank and Fifth Third Bank, the top 20 US bank, and that relationship’s available through Stripe. So, within the Arc app, you already have the diversification of two reputable bank partners. Nevertheless, we encourage clients, and we oftentimes see, anywhere from three to even up to five banks for a sizable middle market client.
PR: Right. And then I think you mentioned a product that does offer FDIC insurance across multiple banks.
DM: Right. And so if you have idle cash, in a couple of clicks, you can quickly diversify that cash across a number of financial products. One of those products is what’s called an insured cash sweep or an ICS. That’s a product made available through our relationship with the bank in Bank of New York Mellon Pershing, where our clients can get up to $5 million of FDIC coverage and earn yield on that cash.
PR: Right. Okay. So, I do want to dive into Arc Intelligence. It’s a relatively recent offering. Give us a little bit more background there. Was this something that was demanded by customers? How did this product come to be?
DM: So when you think about the business in simplest form, think of Arc as a two-sided marketplace, you have software for the borrowers, those are the companies, that’s the cash management business. You have software for the lenders, and that’s Arc intelligence. This was pulled from the market, and it really started in-house, dogfooding our own product. As we built out our capital markets, the launch of our B2B debt marketplace in January of last year, was a very manual process, placing borrowers with lenders. As the AI, the foundational LLMs improved, we saw an ability to take all this unstructured financial data we were ingesting from loan applications and standardize that unstructured data into credit metrics to make these matches faster. So we actually started developing a tool for ourselves. So Arc’s capital team, which are ex-Silicon Valley Bank and FRB and Nomura credit underwriters, we are working on automating their underwriting and matchmaking motion since we launched the Arc Capital Markets product in January. Now with the launch of Arc Intelligence, we really just take that software that we built for ourselves and have been offering that as a service to the lenders on the supply side of our marketplace.
PR: Gotcha.
DM: So if you think of Arc Intelligence, you can think of it as a vertical SaaS product for the private credit industry that has been trained and battle-tested by Arc’s capital team on billions of dollars of proprietary deal flow since the launch of our capital marketplace.
PR: Interesting. Okay. So everything you do right now, this is all debt capital, right? Do you get involved in equity at all?
DM: We don’t touch equity. We have a lot of clients asking us to support with equity placement, but what really makes this whole thing tick is fundamental underwriting. So debt, unlike equity, can be underwritten based on credit metrics and business fundamentals.
PR: Right.
DM: Our model, what the Arc intelligence platform affords, is to take unstructured financial data and convert that into known credit metrics, map it against the lender’s credit box programmatically based on known credit parameters. Equity can be a little bit harder to predict and underwrite. And so we’re really just focused on cracking the code with debt placement first before doing anything in the equity side.
PR: Yeah, that makes sense. So then you’ve got a pretty good window, I imagine, onto the state of the debt capital markets, shall we say. Particularly lower middle market. How is demand from both sides? I imagine demand has remained strong from the startups and the small to medium-sized businesses, but how has demand been trending for the last 12-plus months?
DM: The demand has been incredible, particularly for private credit. And why is that? One, in a high-rate environment, equity is more expensive. And so debt becomes a relatively more attractive alternative. Two, the banks have just been under a lot of pressure for the last couple of decades. And that has created this burgeoning high growth and now multi-trillion dollar asset class that is private credit. And Arc is the market leader in the space, bringing liquidity between the borrowers and the lenders in this lower middle market private credit space. We’re fortunate to be participating in a market at a very unique and exciting time. There’s lots of momentum. There’s an infinite demand from borrowers who lack access to debt capital in the lower middle market. And then you have supply, which is a large and increasing number of private credit funds that are looking to deploy capital but lack distribution and lack technology. And Arc sits in the middle, making this market and bringing together borrowers and lenders in a way that hasn’t been done before. And by the way, it wasn’t possible before the advent of generative AI. And that’s a really exciting part of this market opportunity.
Yeah. And I keep reading that more and more companies are getting into private credit and it’s multiple trillion dollars now that has grown tremendously just in the last couple of years, feels like.
DM: Come on in, the water’s warm.
PR: Okay. What is your vision, then? How are you thinking about Arc long-term?
DM: We’re upending the traditional banking model with software and AI. And when I think about Arc long term, I talked about the scalability of the lender network. As we bring on a new lender, our credit box expands by theirs, right? So we’re absorbing the credit box of lenders. We’re bringing these offline lenders into the age of AI and giving them the technology and the tools to be better and faster and stronger, and then delivering that value to the borrowers who are currently capital-constrained, who are on their heels because the banks won’t lend to them. The equity markets are expensive, and we can come in and make that market and provide them liquidity and efficiency that allows them to focus on growing their business and bringing jobs to the United States. So that’s our mission. You think about the long-term, scaling that up globally, right? And so our software business, our AI platform, we have no borders. What we’re doing in the lower middle market in the United States today, we can do in the mid-market, we can do enterprise, and we can do globally. And that’s what comes next. I have two bank partners here in the US, two of the top 20 banks. I can just as easily add bank partners in other geographies around the world, and our commercial banking business, therefore, expands beyond the confines of the United States. Similarly, I have hundreds of lenders, credit funds, and banks in the United States. I’m currently beholden to their buy box. I can expand to new geographies and bring the same type of bundled commercial banking and debt capital market solution to businesses around the world. And that’s a vision I’m pursuing here. And that’s where I think there’s a real gap in the traditional banking model that I was alluding to at the beginning of this conversation.
PR: Exciting times, Don. I really think you’ve built a great company at a great time. The winds seem to be blowing in your direction. So, best of luck, and thanks for coming on the show.
DM: Thanks for having me. We’re just getting started.
PR: Okay, great.
After we turned off the recording, Don and I were chatting about the advances in AI over the last two years. He commented that the incredible advances they have made on the credit side with their AI analyst simply would not have been possible even just a couple of years ago. The masses of unstructured business data have proven to be challenging to work with, but new advances in AI make complex financial analysis super quick and accurate. And we are still in the 1.0, or maybe 1.1 phase, when it comes to AI applications like this.
Anyway, that’s it for today’s show. If you enjoy these episodes, please go ahead and subscribe, tell a friend, or leave a review. And thanks so much for listening.