Corporate Private Credit: Facilities Beyond the Banks

The corporate direct lending market

Corporate private credit covers loans made by non-bank funds to operating businesses: mid-market companies funding growth, acquisitions, recapitalisations or working capital. Australian managers active here include specialist corporate lenders and diversified managers running direct lending mandates alongside their real estate books.

The borrower base is typically the mid-market — companies large enough to support institutional-sized loans but too small, too leveraged or too complex for the syndicated bank market.

Cash flow lending versus asset-backed lending

Corporate facilities are usually underwritten against enterprise cash flow rather than hard assets. The lender's security is a charge over the business, and the real protection is the borrower's ability to generate earnings through the loan term. That makes diligence different from property lending: industry dynamics, customer concentration, management quality and covenant headroom matter more than a valuation of bricks and land.

Specialist variations include acquisition finance supporting private equity transactions, unitranche facilities that blend first and second ranking debt into one instrument, and recurring-revenue lending against contracted subscription income.

Covenants: the lender's early warning system

Because corporate loans cannot rely on a sale of security, covenants do the heavy lifting. Leverage and interest-cover tests force a conversation early, while earnings are still repairable. Investors in corporate credit funds should ask how covenant packages are set, how often borrowers report, and what the manager's workout process looks like when a covenant trips — the answer distinguishes lenders from passengers.

What this means for borrowers

For a mid-market company, private credit offers a single-lender relationship, bespoke amortisation and faster execution than a bank syndicate, at a higher cost of funds. The borrower's checklist mirrors the lender's: understand every fee, the covenant package, the reporting burden, and how the manager has treated borrowers through difficult periods before signing.