Private credit vs Bank debt
Private credit funds lend from pools of institutional capital rather than customer deposits, giving them more freedom to structure deals that do not fit standard bank criteria. Bank debt remains the cheaper option where a business fits conventional credit policy and has the time to go through a bank's process.
| Criterion | Private credit | Bank debt |
|---|---|---|
| Cost | Higher margin, reflecting flexibility and risk appetite | Lower margin for businesses that fit policy |
| Speed | Often faster, with fewer internal approval layers | Slower, subject to committee processes |
| Structuring flexibility | High, can tailor covenants and repayment profile | More standardised terms |
| Typical deal size | Mid-size to large facilities | Full range, from small to large |
| Sector appetite | Will consider complex or specialist situations | More conservative, sector-dependent policies |
| Relationship expectations | Standalone transaction | Often expects wider banking relationship |
Private credit funds have grown significantly because banks have become more conservative in the sectors and situations they will lend into, particularly following stricter capital requirements. Funds can move faster and structure more bespoke terms because they answer to fewer layers of internal process and are not funded by retail deposits.
For a straightforward, well-collateralised business with a clean trading history, bank debt remains materially cheaper and should usually be the first port of call. The trade-off is time: bank processes typically take longer and can be less forgiving of anything outside standard policy.
Private credit is often used to bridge a gap banks will not fill, such as funding a rapid growth phase, a special situation, or a facility size and structure that falls outside standard bank appetite. It is not usually cheaper, but it can be the difference between a deal completing on time and not completing at all.
Default to bank debt where your business fits conventional policy and timing allows; turn to private credit where speed, structure or sector fit are more important than achieving the lowest possible margin.
No, though it is more established at the mid-market and upwards, some private credit providers do serve smaller businesses with structured or specialist needs.
Yes, this is a common path once the business has stabilised or grown into a profile that fits standard bank criteria.
Not always looser, but they are typically more tailored to the specific business and its cash flow profile rather than applying a standard template.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
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