Private credit has moved from a specialist corner of finance to a central funding source for mid-market and growth-focused companies. As banks concentrate on lower-risk, heavily secured lending, many borrowers now look to private lenders for larger tickets, tailored structures and faster decisions.
For business owners and finance teams, this shift can feel confusing. Terms like direct lending, mezzanine, unitranche and special situations appear in term sheets, but it is not always clear what sits behind them or how these lenders think about risk, pricing and security.
This guide explains what private credit is, the main types of facilities available, how deals are structured, and why more companies are choosing private lenders. It also sets out who typically qualifies, what lenders look for in a transaction and how Financely Group helps businesses access this market in a disciplined way.
Private credit refers to loans and credit facilities provided by non-bank lenders directly to companies, projects or asset pools. Instead of borrowing from a commercial bank or issuing public bonds, the borrower agrees terms with a private lender that holds the exposure, often to maturity, in a negotiated deal.
Key providers include private debt funds, credit strategies within asset managers, specialist financing companies, family offices and credit arms backed by pensions or insurance balance sheets. Their investors are seeking predictable, contractual returns that sit between traditional bank debt and equity on the risk spectrum.
Several forces sit behind the rise of private credit. Post-crisis regulation pushed banks toward higher capital requirements and more standardised products. At the same time, investors searched for yield in a low-rate environment and were prepared to fund specialist lenders that would underwrite complex situations. Companies with strong fundamentals but non-standard needs found private lenders more willing to examine their case in detail.
Compared with traditional bank lending, private credit usually offers:
In return, borrowers should expect deeper due diligence, higher pricing than senior bank loans and a clear focus on risk mitigation through security, reporting and covenants.
The private credit market covers a spectrum of facilities, from plain-vanilla senior loans to complex, structured and event-driven capital. Understanding the main categories helps management teams frame their needs and approach the right lenders.
Direct lending involves senior secured loans provided directly to companies, often to support growth, acquisitions, recapitalisations or refinancings. The facility sits at the top of the capital structure and is usually secured over shares, assets and material contracts.
Typical use cases include funding leveraged buyouts, refinancing existing bank lines, consolidating multiple lenders into a single relationship and providing growth capital where the company has stable cash flows but limited hard collateral.
Mezzanine financing is subordinated debt that ranks behind senior lenders but ahead of equity. It often carries a higher interest rate, payment-in-kind (PIK) features or warrants that give the lender an equity-linked upside.
Businesses use mezzanine when senior banks are not prepared to fund the full amount required, but the owners are reluctant to dilute further by issuing more equity. It is common in buyouts, shareholder reorganisations and late-stage growth situations.
Asset-based lending focuses on the quality and liquidity of specific assets rather than only headline earnings. Facilities are secured and sized against receivables, inventory, machinery, equipment or other identifiable collateral.
ABL works well for trading businesses, manufacturers and distributors that hold significant working capital on their balance sheet. Advance rates, reserves and eligibility tests are used to keep the lender protected as the asset pool moves up and down.
Special situation financing targets companies facing urgent, complex or transitional events. Examples include covenant pressure on existing facilities, time-sensitive acquisitions, restructurings, shareholder disputes or large one-off contracts.
These deals require fast analysis, creative structuring and often higher pricing. Lenders will ask for strong control over collateral, board visibility and clear milestones for the transaction.
Distressed and opportunistic credit focus on companies that are already in financial difficulty or where existing capital structures are unsustainable. The lender may provide rescue financing, buy debt at a discount or participate in a restructuring.
Here, capital is deployed with the expectation that the lender may gain influence over strategy, asset sales or reorganisation plans. The objective is to protect principal and achieve returns through a mix of interest, fees and value recovery.
Hybrid and structured credit solutions sit between pure debt and pure equity. Common forms include preferred equity, unitranche loans that blend senior and mezzanine risk into a single facility, and revenue-based financing where repayments track turnover.
These structures allow sponsors and owners to balance dilution, control and cash flow pressure. They are often used when a standard senior loan cannot support the required leverage, but equity is too expensive or slow to raise.
| Private Credit Type | Typical Borrowers and Use Cases | Key Structural Features |
|---|---|---|
| Direct Lending | Profitable mid-market companies funding acquisitions, growth, shareholder reorganisations or refinancings. | Senior secured loans, term or revolving structures, covenants tied to leverage and interest cover, tight security package. |
| Mezzanine Financing | Sponsors and owners closing a funding gap after senior debt; buyouts, recapitalisations, expansion capital. | Subordinated to senior lenders, higher pricing, PIK components or warrants, longer tenors and covenant-lite features in some cases. |
| Asset-Based Lending (ABL) | Trading, manufacturing and distribution businesses with strong receivables, inventory or fixed asset bases. | Borrowing base formulas, frequent reporting, borrowing limits tied to collateral quality, strong control over accounts and collections. |
| Special Situation Financing | Companies with time-sensitive capital needs, covenant pressure or complex events that banks are reluctant to fund. | Shorter timelines, bespoke covenants, higher fees and margins, tight security and governance protections for the lender. |
| Distressed or Opportunistic Credit | Businesses in restructuring, facing liquidity shortfalls or legacy debt structures that need to be reorganised. | Rescue financing, priming liens, debt-for-equity options, strong lender influence over restructuring outcomes. |
| Hybrid and Structured Credit | Growth companies and sponsors seeking flexible capital between pure debt and equity, often in competitive processes. | Preferred equity, unitranche structures, revenue-based repayments, tailored covenants and negotiated governance rights. |
Behind every private credit facility sits a pool of committed capital, an investment mandate and a credit process that looks carefully at risk and return. Understanding this process helps management teams prepare better information and negotiate cleaner terms.
Direct lending funds raise capital from investors such as pensions, insurers, family offices and other professional pools of money. The fund manager then deploys that capital into a portfolio of loans across sectors and regions, seeking stable income and downside protection.
For the borrower, this usually means dealing with a single lending group that can hold the entire facility, rather than a syndicate of banks. The lender performs detailed due diligence on the company, its financials, contracts and management team before issuing a term sheet and, later, final documents.
Private credit terms are shaped around the borrower’s cash flows and asset base. Key elements of the structure include:
Private lenders can often move faster than traditional banks because their approval chains are shorter, their documentation libraries are more flexible and their teams are used to analysing transactions that do not fit standard templates.
For a prepared borrower with clean financial statements, a coherent business plan and a ready data room, it is realistic to move from initial discussion to signed documentation in a few weeks. More complex or cross-border deals still take time, especially where multiple jurisdictions and regulatory questions are involved.
One of the main attractions of private credit is the ability to fund situations that banks avoid. Examples include:
That flexibility does not remove discipline. Lenders still expect detailed information, realistic forecasts and alignment of interests between shareholders and management.
Companies do not choose private credit only because banks say no. Many use it as a strategic tool to secure larger, longer or more flexible funding than their day-to-day banking partners can provide.
Not every business is a candidate for private credit. Lenders focus on situations where there is a clear path to repayment, credible management and deal sizes that justify the work involved. Typical beneficiaries include:
Banks and private lenders both play important roles in corporate funding. The right choice depends on the company’s objectives, timing and risk profile.
| Factor | Private Credit Lenders | Banks |
|---|---|---|
| Decision Speed | Often able to move from first meeting to term sheet quickly where information is clear and the mandate fits. | Longer processes with multiple committees, especially for non-standard structures or new clients. |
| Risk Appetite | Prepared to fund higher leverage, complex structures and event-driven deals for higher returns. | Focused on lower-risk, standardised loans with tight regulatory capital limits. |
| Collateral Expectations | Will consider a wide range of security, including contracts, receivables, inventory and shares. | Often prefer hard assets, simple charges and standard collateral packages. |
| Pricing | Higher margins and fees reflecting flexibility, speed and complexity. | Lower margins but stricter eligibility and more limited structures. |
| Deal Size and Customisation | Well suited to larger, bespoke facilities where a single relationship lender is preferred. | Well suited to day-to-day working capital, overdrafts and plain-vanilla loans. |
| Ideal Use Cases | Acquisitions, recapitalisations, complex growth plans, restructurings and special situations. | Core banking, transactional accounts, vanilla term loans and trade services. |
While every lender has its own mandate, most focus on similar foundations when assessing a private credit opportunity.
Private credit capital supports a wide range of practical business needs. Typical applications include:
Financely Group works with sponsors, owners and management teams that need more than a standard bank loan. Our focus is on structured private credit solutions across trade, project, acquisition and growth finance, with clear attention to lender expectations and risk controls.
In practice, this means helping clients frame their funding need, prepare bank-grade information packs and present transactions in a way that private lenders can assess quickly. We bring together financial models, security structures, cash flow analyses and supporting documentation so that credit teams can see the full picture without chasing missing pieces.
Through regulated partners and a network of private credit providers, we connect eligible borrowers with senior lenders, mezzanine providers, special situation funds and asset-based financiers. Mandates are handled on a best efforts basis, with transparent engagement terms and clear communication around timelines, fees and closing conditions.
If your business is considering a private credit facility, the most effective starting point is a clear summary of your funding need, financials and collateral. With that in place, it becomes far easier to identify the right lenders and negotiate terms that support long-term growth rather than short-term fixes.
Financely Group can review your plans, outline realistic options and help you prepare a funding package suitable for private lenders across multiple jurisdictions and sectors.
Share your transaction outline, financial statements and supporting documents with our team to explore private credit options and lender appetite.
Submit Your Funding RequestDisclaimer: This page is for general information only and does not constitute legal, tax, accounting or investment advice. Financely Group acts as advisor and arranger through regulated partners and is not a bank or direct lender. Any private credit, loan, security or capital raising structure is subject to underwriting, KYC, AML, sanctions screening, legal review, documentation, perfected security and approvals by relevant stakeholders. No public offer or solicitation is made on this page.
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