What private credit is, and when it makes sense for your business

Private credit is lending that comes from a private fund or firm rather than a chartered bank or credit union. In Canada it has grown from a niche into a mainstream source of capital for businesses and real estate investors, for a simple reason: banks are built to say yes to the same deal many times, and private lenders are built to say yes to the deal in front of them.

How private credit differs from bank lending

A bank prices risk cheaply but applies a narrow template. It wants two or three years of stable financial statements, a borrower who fits a defined credit box and a committee process that can take weeks. A private lender such as Catalyst prices risk higher but underwrites the actual asset and plan. That means transitional real estate, fast-growing companies, buyouts and special situations can all be financed when a bank would decline or delay.

When it makes sense

Private credit is usually the right choice when timing matters, when the asset is strong but the statements are not yet, or when the situation does not fit a product name. It is rarely the right choice for a stable business that qualifies for bank financing at a lower cost. We tell borrowers this directly, and we structure our loans with the expectation that many will refinance with a conventional lender once the plan has been executed.

What to expect from the process

A good private lender should give you a clear indication within days, not weeks, and a term sheet that spells out rate, fees, term, security and exit requirements in plain language. Ask who makes the credit decision, where the capital comes from and what happens if the exit is delayed. The answers tell you a great deal about who you are dealing with.

This article is general information, not financial, legal or tax advice. Consult your own advisors before acting on it.