Private Credit vs Banks: Who Will Fund The Next Decade Of Trade?

Global trade keeps growing, and so does the capital required to move cargo from mine, field, or factory to end buyer. Trade finance already supports the majority of world trade, yet an estimated gap of around USD 2.5 trillion still separates the capital that businesses need from what banks are willing or able to provide.

At the same time, private credit has moved from niche concept to core asset class. Global private credit assets under management are now measured in the trillions of dollars and are expected to roughly double again by the end of this decade. A growing slice of that capital is moving into trade-linked exposures as investors hunt for short tenor, collateral-backed yield.

Trade Finance Demand Is Outrunning Bank Capacity

Trade volumes are pushing to new highs and supply chains are more complex, with longer routes, higher working capital needs, and more counterparties per transaction. Yet large banks face tighter capital rules, strict internal country limits, and costly compliance overhead for every trade facility they book.

The result is a persistent shortfall. Surveys from development banks put the global trade finance gap at about USD 2.5 trillion, roughly ten percent of global merchandise trade. A large share of rejections affects smaller and mid-sized firms, newer markets, and sectors that require more intensive due diligence relative to ticket size.

For top tier importers and exporters with long relationships and clean profiles, banks still provide deep, price-competitive capacity in letters of credit, guarantees, and supply chain finance. The real pain shows up one level down, where balance sheet and country limits bite faster.

What Banks Still Do Better Than Anyone

Banks remain the default trade finance provider for a reason. The largest players operate globally, connect to clearing systems in multiple currencies, and sit inside the regulatory core of the financial system. For many corporates, bank-backed trade lines are still the anchor facility around which everything else is built.

For straightforward, high grade trade flows where both parties are already banked and the structure fits policy, banks will remain the anchor funder. The tension emerges where risk, jurisdiction, or structure falls between policy gaps.

How Private Credit Is Rewriting The Funding Mix

Private credit has grown into a global market of around USD 2 trillion in assets, after roughly quadrupling over the last decade. Analysts expect that figure to at least double again over the coming years, supported by investor demand for yield and by borrowers who can no longer rely on banks in the same way as before.

Much of this capital began in direct lending to sponsor-backed companies, but the scope has widened to include receivables finance, inventory finance, and trade-linked structures. Trade finance is attractive to private credit for three simple reasons.

• Short duration, often 30 to 180 days, which allows frequent re-pricing and rapid recycling of capital.
• Asset-backed structures tied to documents such as invoices, warehouse receipts, or letters of credit.
• Risk profiles that can sit senior in the capital stack while still generating mid to high single digit spreads over benchmarks, sometimes more where complexity is higher.

This is not equity risk in disguise. Done properly, private credit in trade finance focuses on self-liquidating flows, clear collateral, and strong collection mechanics. That is exactly the space where banks would traditionally sit, yet today many banks choose to ration exposure.

Banks vs Private Credit In Trade Finance: A Practical Comparison

The contrast is clear. Banks still dominate standardised, policy friendly trade. Private credit steps in where the risk is harder to fit into a box, where complexity rewards specialist underwriting, or where banks have pulled back.

What This Means For Borrowers

For traders, exporters, and importers, the split between bank and private credit funding is not an abstract macro trend. It shapes how quickly deals move, what covenants apply, and how much capital is available for the next shipment.

In practice, the strongest sponsors use both. Core bank lines handle routine flows and transactional services, while private credit programs sit alongside to fund incremental volume, new routes, or more complex structures that banks avoid.

What This Means For Lenders And Private Credit Investors

For investors, trade finance inside a private credit strategy offers short tenor, recurring cash flows, and collateral-backed exposure that usually sits senior to operating equity. It is not risk free, but it behaves differently from long duration corporate credit or equity.

Well structured portfolios typically focus on:

• Self liquidating transactions where repayment is tied to specific receivables, collections, or LC settlements.
• Hard limits per obligor, country, commodity, and program sponsor.
• Clear security packages backed by documents such as warehouse receipts, title documents, or insured receivables.
• Strong local partners for collateral control, inspection, and legal enforcement.

The most serious concern for investors is not finding assets, it is keeping underwriting standards tight while scaling. That is where data, documented track record, and disciplined mandates matter more than marketing slides.

A Simple Framework For The Next Decade Of Trade Funding

Instead of asking whether banks or private credit will win, a better question is how the two interact.

• Banks will continue to anchor core transactional services, short term loans, and standard documentary trade for top tier clients.
• Private credit will keep expanding into funded participation programs, receivables portfolios, and bilateral facilities where banks seek to release capital or transfer risk.
• Development banks and export credit agencies will still support strategic flows, but often with private investors and banks sharing risk beside them.

For serious borrowers the task is to present a credible file that both sides of the market can understand. For serious lenders the task is to allocate to structures where credit, legal, and operational risk are properly documented and monitored.

How Financely Sits Between Banks And Private Credit

Financely focuses on the unglamorous part of the process. We help sponsors tighten their data rooms, shape structures that make sense to both banks and private credit funds, and introduce deals into settings where approval odds are realistic.

Disclaimer: This page is for general information only and does not constitute legal, tax, investment, financial, or regulatory advice. Any reference to banks, private credit funds, or trade finance strategies is descriptive and not a recommendation. Financely is not a bank, lender, credit fund, or broker dealer and does not accept client deposits or provide investment products to the public. All mandates are subject to eligibility checks, KYC and AML procedures, sanctions screening, independent legal and tax advice on the client side, and final approval by relevant counterparties. Past performance in trade finance or private credit does not guarantee future results.