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Private Credit
What is private credit?
Private credit is a category of financial services where non-bank lenders provide loans to businesses. Instead of getting a loan from a bank, businesses can get a loan from a private credit firm that specializes in a specific type of lending suited to that business' needs.
Private credit has emerged into a fast growing, trillion dollar industry for the following reasons:
- Private credit firms have a low cost of capital, especially those that are funded by insurance companies, and are able to offer competitive terms.
- Private credit firms are not subject to banking regulation and can therefore move faster and more creatively in extending credit to borrowers.
- Banking sector instability, particularly in a rising interest rate environment where there is risk of depositor flight, has reduced the appetite of banks to extend credit, making private credit firms more reliable and the go-to lender of choice for businesses seeking credit.
How to invest in private credit?
There are a multiple ways to invest in private credit:
- Become a limited partner in a private credit firm: this requires identifying private credit firms with a lending focus or strategy in which you are comfortable. Many private credit firms will have a
