Private credit has expanded substantially over the past decade, filling gaps left by traditional bank lending and offering flexible structures for businesses, real estate sponsors, and project developers that may not fit conventional financing criteria.

For qualified borrowers, understanding how private credit works — and what lenders and capital providers actually evaluate — is an important first step before approaching the market.

What Is Private Credit?

Private credit refers to non-bank lending arranged outside of public debt markets. It encompasses a broad range of financing structures, including:

• Direct lending — term loans and revolving facilities provided directly by a fund or institutional lender
• Mezzanine financing — subordinated debt, often with equity participation features, used to bridge gaps between senior debt and equity
• Unitranche facilities — a single blended facility combining senior and subordinated debt in one instrument
• Bridge financing — short-term capital to bridge a gap pending a longer-term solution, refinancing, or asset sale
• Acquisition financing — capital structured to support a business acquisition or management buyout

Unlike bank loans, private credit transactions are typically negotiated directly between the borrower and the lender, allowing for greater flexibility in structure, covenants, and timing.

Why Borrowers Turn to Private Credit

Qualified borrowers seek private credit for a range of reasons:

Speed and certainty. Private credit transactions can often be structured and closed more quickly than syndicated bank facilities, which is important when timing is critical — for acquisitions, refinancings, or time-sensitive opportunities.

Structural flexibility. Private lenders can accommodate structures that banks may not — interest reserves, PIK (payment-in-kind) components, covenant-light terms, or bespoke repayment profiles aligned with the borrower's cash flow.

Access for non-standard situations. Businesses with complex ownership structures, limited operating history, or assets that do not fit standard bank collateral criteria may find private credit more accessible than conventional lending.

Confidentiality. Private credit transactions are not publicly disclosed in the same way as syndicated loans or bond issuances, which can be important for businesses managing sensitive transactions.

What Private Lenders Evaluate

Private credit is not a last resort — it is a structured capital solution for qualified borrowers. Lenders evaluate submissions carefully, and the quality of the submission matters significantly.

Creditworthiness of the borrower. Lenders assess the financial health of the business — revenue, EBITDA, cash flow, existing debt obligations, and the trajectory of the business. Strong, consistent cash flow is the foundation of most private credit transactions.

Purpose and use of proceeds. Lenders want to understand precisely how the capital will be deployed and how it will be repaid. Vague or speculative use-of-proceeds statements raise immediate concerns.

Collateral and security. Most private credit transactions involve some form of security — real property, business assets, receivables, or equity pledges. The quality and enforceability of the collateral matters.

Management and ownership. The experience and track record of the management team, and the clarity of the ownership structure, are evaluated carefully. Lenders are backing people as much as they are backing assets.

Exit and repayment path. Lenders need to understand how and when they will be repaid — whether through operating cash flow, asset sale, refinancing, or another defined event.

Preparing a Credible Capital Request

A well-prepared capital request significantly improves the quality of engagement with private lenders. At a minimum, a credible submission should include:

1. Executive summary — a concise overview of the borrower, the capital requirement, the use of proceeds, and the proposed repayment structure
2. Financial statements — audited or reviewed financials for the past two to three years, plus current management accounts
3. Financial projections — a realistic forward-looking model with clearly stated assumptions
4. Collateral schedule — a summary of assets available as security, with current valuations where available
5. Ownership and corporate structure — a clear chart showing the ownership and legal structure of the borrowing entity
6. Management profiles — brief biographies of key principals and management team members

Incomplete submissions, unsupported projections, or unclear ownership structures are among the most common reasons a capital request does not progress beyond initial review.

Understanding Pricing and Terms

Private credit is priced to reflect the risk profile of the transaction and the flexibility of the structure. Borrowers should expect:

• Interest rates that are typically higher than senior bank debt, reflecting the risk premium and structural flexibility
• Origination and arrangement fees payable at closing
• Covenants that may include financial maintenance tests, reporting obligations, and restrictions on additional indebtedness or asset disposals
• Prepayment provisions that may include make-whole or call protection provisions

Borrowers should engage qualified legal and financial advisers to review all terms before executing any financing agreement.

A Note on Intermediaries

Many private credit transactions are introduced through intermediaries — advisers, brokers, or placement agents. If you are working with an intermediary, ensure they have a genuine relationship with the capital provider and that their mandate is clearly documented.

Unverified intermediaries presenting "soft commitments" or "indicative term sheets" from unnamed lenders are a common source of wasted time and, in some cases, fraud. Qualified borrowers should insist on direct engagement with the capital provider at an appropriate stage of the process.

Conclusion

Private credit offers genuine financing solutions for qualified borrowers who understand the market and approach it with well-prepared submissions. The key is to present a credible, complete, and transparent picture of the borrower, the opportunity, and the repayment path.

If you are evaluating a private credit requirement, Global Resources Hub can provide introductions to qualified capital relationships for transactions that meet our mandate criteria.

This article is provided for general informational and educational purposes only and does not constitute financial, legal, or investment advice. Qualified parties should obtain appropriate professional advice before entering into any financing transaction.