Private Credit Funding
The banking system of any country is a major contributor to the Economy. Governments and Bankers always put in the effort to carry out all the economic transactions through the banking system. However, the banking system works in a defined framework. And there are always some exceptions to the standard condition when it comes to fundraising.
This is where private credit funding comes into the picture, where the business crosses certain operational limits and cannot fit with regular banking operations. Or there are certain scenarios of the business that bankers cannot fund.
Understanding the Key Features
Private Credit funds work internationally. They are always very clear about government rules and regulations. All private debt players are RBI (Reserve Bank of India) and SEBI (Securities Exchange Board of India) license holders. Lenders always make sure the funding does not violate any of the government or RBI norms. It is 100% safe and secure to borrow money.
Unlike the banking system, the norms in private credit are very flexible. The solution can be arranged at the convenience of the client. There is no hard and fast structure to be followed. The amount can be arranged in a term loan format or maybe in other required formats; the term can be flexible, the repayment structure can be flexible, and the EMI structure can be flexible. So, in short, all the possibilities can be arranged as long as they help the business to grow.
The turnaround time to execute the proposal under private credit is very short. This is because there are not many authority levels involved. The structure in the fund houses is very flat. And the fund houses are very aggressive about the funding.
The private credit players work in international markets with high ticket sizes. So, there is no upper limit on the required amount. As long as the client matches the expectations and meets the fund houses’ criteria, there will not be any concern about the upper exposure limit. The fund houses can take exposure up to some thousand crores.
The amount is lent in debt format. So there is no question of equity dilution. Lenders will be comfortable as long as they are getting paid for their interests and principles. However, there is always flexibility in the repayment of the debt. The lender may propose some equity. However, the terms and conditions are mutually agreed upon. Nothing goes forward unless it is mutually agreed upon by both parties.
When any private credit player infuses funds into any business, they make sure the business gets all the required fuel to grow. The fund houses will make sure you get connected to all the required major players from the market, where you can push the growth.
The long-term association helps everyone. The same applies to private credit funding. Whenever private debt players infuse the funds, they make sure there is a long-term association with the client. So, this will stand as a win-win condition for both private debt players and clients.
Private credit players do not infuse the funds unless they are well-versed in the industry. So the borrower does not have to put in the effort to make the lender understand industry challenges. Rather, lenders help borrowers deal with the industry challenges in the best way possible.
What is Private Credit Funding?
Private credit funding is an unconventional way of fundraising. It refers to lending by non-bank institutions (alternative investment funds, private credit funds, direct lenders) to corporates, especially those that may not fit the standard bank mold. It helps you avoid equity dilution and offers more flexibility than conventional bank debt.
The private credit market in India is experiencing rapid growth. What this means for promoters/directors in an Indian metro or industrial hub: You have more options than banks, especially if you’re pursuing capacity expansion, acquisition, refinancing, or structured growth in sectors like manufacturing, EV, biotech, hospitals, or automation.
