Private Credit

A brief explanation for what private credit is

Private credit refers to non-bank lending where capital is provided directly to businesses that lack sufficient track records to access traditional bank loans. Unlike private equity, where investors give up ownership stakes, private credit allows companies to secure financing without diluting equity. This makes it a preferred option for founders who want to retain control while still accessing capital for growth.

In traditional finance, private credit has been dominated by institutional investors such as family offices, sovereign wealth funds, hedge funds, and pension funds. These investments are typically and naturally illiquid compared to public markets, as private credit instruments are not frequently traded or valued. For retail investors, access to this asset class is limited due to a lack of transparency, infrequent valuations, and high minimum investment requirements in conventional markets.

The private credit landscape is diverse, spanning various strategies and underlying assets. Direct lending involves non-bank lenders issuing loans directly to mid-sized firms. Mezzanine debt combines features of debt and equity, often including equity warrants. Asset-Backed Finance (ABF) is secured by tangible assets such as aircraft, machinery, or music royalties, while real estate private debt covers construction loans and mortgage-backed financing. Specialty finance targets niche areas like litigation funding or trade finance. Additionally, structured credit products, such as collateralized loan obligations (CLOs) and asset-backed securities (ABS), pool multiple loans for diversified exposure.

Private credit gained momentum after the 2008 Global Financial Crisis (GFC), as regulatory changes like the Dodd-Frank Act limited banks’ lending capacity. Private credit funds, being less constrained by heavy regulation, stepped in to fill this financing gap, providing flexible and specialized capital solutions. This adaptability and diversification of underlying assets make private credit a powerful alternative to both traditional lending and equity financing, offering investors attractive risk-adjusted returns.

With the private credit market not only experiencing explosive growth in recent years but also evolving through tokenization, a new era of accessibility, efficiency, and innovation is unfolding,

Now is the time to be part of this transformation.