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Growing a business comes with challenges. You’ve got a vision, a strong team, and a growing enterprise, but sometimes, the path to sustained growth and smooth operations demands capital. From managing seasonal cash flow gaps to investing in new equipment or seizing new opportunities, securing the right financing is non-negotiable.
For many businesses, especially those with $2M to $50M in annual revenue, traditional bank loans can feel limiting. Rigid requirements, long approval timelines, and one-size-fits-all structures often fail to reflect how these businesses actually operate. That is where private credit comes in, offering a more flexible approach that many businesses overlook. Below, we’ll explain what private credit is, who provides it, and how it works in practice.
What is private credit? A simple guide for business owners
At its core, private credit is debt financing provided by non-bank capital providers directly to businesses. Instead of relying on traditional banks or issuing bonds in public markets, companies access private credit to secure financing that better fits their operational needs.
The “private” in private credit means these loans are negotiated directly between a business and a private capital provider, rather than traded on public markets. This one-to-one relationship allows financing to be structured around a company’s specific needs, with more flexibility and responsiveness than traditional lending options.
For example, a manufacturing business experiencing rapid growth may face delays in purchasing inventory because of extended supplier payment terms. A traditional bank might hesitate to provide a quick bridge loan without significant collateral or a strong credit profile. A private credit lender, however, can structure an asset-backed loan or revolving line of credit designed specifically to cover inventory costs, based on a deeper understanding of the business and its supply chain.
The players: Who provides private credit?
Private credit is provided by a range of non-bank lenders, each with its own approach to deal size, structure, and risk.
- Direct lending funds: Provide loans directly to businesses and are designed to move quickly with customized terms.
- Specialized finance companies: Focus on specific types of financing, such as equipment loans or asset-backed lending, and structure financing around the value of those assets.
- Business development companies (BDCs): Publicly traded companies that provide private loans to mid-sized businesses.
- Family offices and other institutional lenders: Private investment groups that may provide direct financing for certain industries or transaction sizes.
These private credit lenders often step in where traditional banks hesitate, particularly for businesses with rapid growth or cash flow needs that don’t fit standard bank models. Many take a more relationship-driven approach and stay engaged beyond closing.
How private credit lending works: Reducing the layers
Private credit is built around direct lending. Instead of syndicated loans where a group of banks collectively fund a large borrower, or issuing bonds to public markets, private credit lenders work directly with the businesses they fund, creating a more streamlined process from start to finish.
When you work with a private credit lender, you’re often dealing directly with the decision-makers who underwrite the loan, set the terms, and provide the capital. This elimination of third parties significantly accelerates the process, which is invaluable when seizing time-sensitive opportunities or addressing urgent cash flow needs.
Tailored solutions for unique business needs
A defining feature of private credit is flexibility. Instead of offering a standard menu of loan products, private lenders structure financing around how a business actually operates; that means cash flow, assets, and growth plans. This shows how private credit works in practice, adapting to the needs of each business.
Customizable Loan Structures:
Private credit offers an array of loan types that can be mixed and matched. You might encounter:
- Term Loans: A lump sum repaid over a fixed period.
- Revolving Lines of Credit (LOC): Flexible access to funds that can be drawn and repaid as needed, often used to manage cash flow.
- Unitranche Facilities: A single loan that blends senior and junior debt, simplifying the structure and often accelerating the process.
- Floating Interest Rates: Many private credit loans use floating rates tied to market benchmarks, which can change as conditions shift.
- Flexible Collateral Requirements: While loans are often secured, collateral may include assets beyond real estate, such as inventory, accounts receivable, or intellectual property, depending on the business and industry.
- Repayment Schedules: Repayment terms can be structured to align with a business’s cash flow cycles, including seasonality, helping reduce strain during slower periods.
These tailored approaches let private credit lenders serve a wide range of businesses, from a restaurant chain’s expansion to an e-commerce company investing in marketing or a manufacturer upgrading equipment. Each opportunity is based on its own merits, with financing structured to fit the business’s operations and growth strategy.
Why businesses turn to private credit
Businesses ready to take on more often turn to private credit when traditional financing can’t keep pace with demand. The unique characteristics of private credit lending offer distinct benefits that are difference makers for companies focused on building upward, operational efficiency, and navigating complex financial landscapes. It involves working with lenders who take the time and patience to understand the business and structure financing around its specific needs.
Speed and efficiency in securing capital
Time is money, especially for a fast-growing business. Private credit lenders typically move faster than traditional banks, which often require lengthy applications, extensive documentation, and multiple layers of approval that stretch over weeks or even months. Private credit firms are built for speed and efficiency.
Their direct lending model, coupled with specialized teams and streamlined underwriting processes, means that decisions can be made much faster. For instance, if your construction business lands a major new project and needs immediate working capital for materials and labor, waiting months for bank approval could mean missing the opportunity entirely or facing significant delays.
A private credit lender can often provide commitments and disburse funds in a fraction of that time, enabling you to capitalize on opportunities quickly. This agility helps address urgent cash flow needs, allowing you to react swiftly to market demands or unexpected challenges without losing momentum
Incomparable flexibility and customization
Growing businesses don’t follow a straight line. Traditional bank loans often fail to reflect that reality, especially when cash flow fluctuates, revenue is seasonal, or capital needs change quickly. Private credit lenders offer a model that adjusts with how your operation runs, structuring financing around the actual rhythm of the business.
In these cases, private credit steps in with financing that can be structured around the business’s real situation. Repayment schedules align with seasonal revenue or major operational shifts, not a fixed formula.
Let’s take a manufacturer preparing for a major equipment upgrade. The business is solid, contracts are in place, but maybe the credit score took a hit. A private credit lender will review active contracts, projected output, cash flow, and how the new equipment will improve operations. That way the focus isn’t so much on the credit score as it is that things are moving forward and ready to deliver.
The part banks usually skip
One of the key differences with private credit is the relationship behind it. Unlike traditional bank lending, private lenders approach relationships differently. Lenders don’t disappear after the loan closes. Instead, they focus on outcomes, and structure support that adapts as the business changes.
This kind of partnership often goes beyond just funding. Many private credit lenders offer real-world experience. They’ve worked with hundreds of businesses like yours so it’s easy to flag issues before they become problems. Some offer input on financial planning, help think through decisions, or connect you to trusted partners when you need support.
This speaks to the question, “Who’s actually willing to fund my business when the banks say no?” It’s really just about working with lenders who see what your business is capable of, especially if a bank doesn’t. Private lenders focus on finding a way forward. They’re not here to add pressure so much as just keep moving.
Is private credit the right fit?
While private credit can offer meaningful advantages for businesses seeking customized working capital, it’s most effective when evaluated in context. Understanding how these solutions are structured, and what they require in practice, helps ensure they align with your business’s goals and risk profile.
This section isn’t about focusing on drawbacks. It’s about giving you the perspective needed to make informed decisions and determine whether private credit fits into your broader financial strategy.
Considerations with private credit
One of the biggest considerations with private credit is cost. In many cases, private credit carries higher interest rates than traditional bank financing does. That pricing reflects what private lenders are built to offer, like faster timelines, customized structures, and solutions for businesses that may not fit traditional bank underwriting. It can also reflect the expectations of private credit investors, who commit capital for longer periods of time.
Private credit can move faster than a bank and give you more room to structure the deal. But that flexibility usually comes with tradeoffs.
The key is making sure the capital supports a clear business outcome, expansion, equipment, inventory, or working capital that actually pays for itself. It’s also important to read the term sheet closely. Private credit agreements can include more detailed requirements, from covenants to repayment triggers. A careful review upfront helps you avoid surprises later.
Private credit isn’t inherently “riskier,” but it can become dicey if the structure doesn’t match your cash flow or the loan is too big or imbalanced. When it’s built thoughtfully, private credit can do the opposite: provide stable capital that reduces pressure and helps you plan with more confidence.
Is private credit right for your business? Making an informed decision
Now that we’ve discovered what private credit is, who the key players are, and how it works in theory and practice, the question becomes: does this financing model work for your business?
Private credit tends to be most useful when traditional financing falls short. This includes situations where:
- You're experiencing rapid growth: You need capital now to take advantage of contracts, orders, or expansion opportunities.
- You're facing specific cash flow challenges: Seasonal slowdowns, extended payment terms, or one-time spikes in demand put pressure on working capital.
- You require operational support: Equipment upgrades, facility expansion, or supply chain changes require financing that matches real project timelines.
- Your business doesn’t fit the bank’s mold: Your industry or operational setup doesn't fit standard banking risk assessments.
- You need speed and flexibility, on your terms: Time is of the essence, and you require financing terms tailored precisely to your needs, rather than a generic offering.
Private credit can be a strategic tool in your overall financing plan. It helps create predictability and keeps you in control, so you can plan ahead without the pressure of a large principal payoff at the end of the term.
When you understand how private credit fits your situation and work with a partner who comprehends how your business actually works, it’s a powerful tool. If that’s where you are, we’re ready when you are.
ABOUT THE AUTHOR
Joseph Camberato is the CEO & Founder of National Business Capital, where he has led the company in funding more than $3 billion for growth-minded businesses since 2007. With firsthand experience building NBC from a startup into a national private lender, Joe writes on the economic forces shaping access to capital, including interest rate shifts, private credit trends, and the challenges mid-sized companies face when banks pull back.
