Private credit is often introduced too late.
In many cases, the conversation only begins once a bank has declined the application, a deadline is approaching or a conventional facility no longer fits the transaction.
By then, the client’s options may already be narrowing.
For professional advisers, whether wealth managers, accountants, lawyers, corporate advisers or other trusted specialists, the more useful question is not:
“Has conventional lending failed?”
It is:
“Has the client reached a point where a more flexible source of capital should be considered?”
That is a very different threshold.
Private credit should not be treated as a last resort. Nor should it be viewed as the automatic answer to every complex funding requirement.
The value lies in recognising when the conversation is worth having.
Start With The Client’s Objective
The right time to raise private credit is usually when the client’s commercial or financial objective begins to sit outside the parameters of a standard lending framework.
That may be because of timing.
An acquisition may need to complete quickly. A refinancing deadline may be approaching. The client may need to release capital before another transaction can proceed.
It may be because of structure.
The borrower could have a complex ownership arrangement, multiple income sources, non-standard security or a requirement that does not fit comfortably within mainstream policy.
Or the client may simply require a level of flexibility that a conventional facility is unlikely to provide.
The important point is that the conversation should begin with the objective, not the product.
Private Credit Is Not Simply For Declined Cases
One of the more common misconceptions is that private credit only becomes relevant after traditional lenders have said no.
That is too narrow.
There are situations where conventional funding may be available, but the process, structure or restrictions attached to it do not align particularly well with what the client is trying to achieve.
A conventional facility may offer a lower cost of capital, but that does not automatically make it the more suitable solution.
If the client needs faster execution, greater flexibility around repayment or security, or a facility designed around a transitional strategy, private credit may still be worth considering.
The comparison should therefore be based on suitability, not simply availability.
Timing Matters
Professional advisers are often closest to the client when these needs first emerge.
An accountant may identify a developing liquidity requirement.
A lawyer may be working on a transaction with a compressed completion timetable.
A wealth adviser may know that the client would prefer not to liquidate investments to raise capital.
A corporate adviser may be supporting a business through an acquisition, restructuring or period of transition.
These are precisely the points at which an early funding conversation can be useful.
The objective is not to recommend private credit prematurely.
It is to ensure the client understands the relevant funding options before the requirement becomes urgent.
Complexity Can Be A Signal
Private credit may become relevant where the underlying borrower is financially strong but the case does not fit neatly within standard credit policy.
That might include:
- complex income or ownership structures;
- unusual or mixed-use property;
- multiple sources of repayment;
- short trading histories;
- significant assets but limited conventional income;
- transitional or time-sensitive situations; or
- transactions requiring bespoke security or repayment terms.
In these circumstances, the issue is often not simply whether the client can support the borrowing.
It is whether the lender is prepared to understand the wider financial position and structure the facility around it.
That is where a more flexible credit approach may have value.
Flexibility Needs To Justify Its Cost
Private credit is not inherently better than conventional lending.
Greater flexibility can come at a higher cost, whether through pricing, fees or other terms.
That additional cost should therefore solve a genuine problem.
Does the facility allow the client to complete a transaction that might otherwise be lost?
Does it reduce the need for an unnecessary asset sale?
Does it create time to reposition an asset before refinancing?
Does it support a strategy that would otherwise be constrained by standard lending criteria?
If not, the additional flexibility may have limited value.
The assessment should therefore focus on what the capital enables the client to achieve, rather than access alone.
The Structure Matters As Much As The Source
Once private credit is being considered, the discussion should move beyond headline pricing.
A well-structured facility needs to reflect:
- how the capital will be used;
- how long it is genuinely required;
- whether interest will be serviced or rolled;
- what security is appropriate;
- which covenants or conditions are workable;
- how much flexibility the borrower needs; and
- how the facility will ultimately be repaid or refinanced.
- This is where early advice becomes particularly important.
A facility that solves the immediate funding requirement but creates excessive refinancing pressure or an unrealistic repayment profile is unlikely to represent a successful outcome.
The debt should support the strategy, not create the next problem.
The Professional Adviser’s Role Is To Recognise The Trigger
A professional adviser does not need to determine whether private credit is the right solution.
That assessment belongs with a specialist finance adviser.
The more valuable role is recognising when the client’s circumstances suggest the conversation should be opened.
A useful trigger may be when:
- the required timeframe is shorter than conventional lending is likely to accommodate;
- the transaction is structurally complex;
- the borrower has strong underlying wealth but limited fit with standard affordability models;
- the client requires greater flexibility around repayment, security or drawdown;
- the funding requirement is transitional rather than permanent; or
- the cost of delay may outweigh the premium attached to more flexible capital.
At that point, raising private credit is not about recommending a product.
It is about widening the strategic conversation.
Earlier Conversations Create Better Choices
At Henry Dannell, we believe private credit is most useful when it can be considered early enough to be compared properly with other funding routes.
That gives the client the opportunity to weigh cost, flexibility, speed, certainty and structure before making a decision.
For professional advisers, the question is therefore not whether private credit should always be discussed.
It should not.
The better question is whether the client has reached a point where standard lending parameters may no longer align with what they are trying to achieve.
When that happens, introducing the conversation early can create more options, more considered structuring and a clearer route to execution.
Because private credit is most valuable when it forms part of the strategy.
Not when it becomes the only option left.
Private credit and specialist finance are subject to lender criteria and individual circumstances. Where borrowing is secured against property or other assets, those assets may be at risk if the terms of the facility are not met. Independent legal and tax advice should be taken where appropriate.
