In today’s tightening credit environment, Small and Medium Enterprises (SMEs) and manufacturing firms often face challenges in securing timely loans from traditional lenders such as banks and NBFCs. Factors like rigid collateral requirements, slow approval timelines, and limited risk appetite among lenders have created a financing gap — and that’s where private credit steps in as a strong alternative.
What is private credit?
Private credit refers to debt financing provided by non-bank institutional investors — such as Alternative Investment Funds (AIFs), family offices, private debt funds, or high-net-worth investors (HNIs). These investors extend loans directly to companies, typically for a fixed tenure and return, without routing through the formal banking system.
Unlike traditional loans, private credit is customized, faster, and flexible, catering to situations where traditional lenders hesitate.
When companies should use private credit
Private credit is ideal when a business needs purpose-specific funding that banks or NBFCs are unwilling to provide. Below are some practical use cases:
1. Project-specific funding (without collateral pressure)
Example:
A manufacturing company plans to set up a new product line requiring ₹25 crore for plant and machinery. Banks insist on full collateral coverage, which the promoter cannot provide.
A private credit fund can structure a secured or mezzanine debt based on projected cash flows rather than fixed collateral, enabling the company to execute the project without dilution of equity.
2. Bridge financing for working capital or expansion
Example:
An SME awaiting disbursement of a sanctioned loan or subsidy can raise short-term private credit for 6–12 months to bridge the gap and maintain operations smoothly.
3. Acquisition or buyout opportunities
Example:
A mid-sized auto component manufacturer gets the opportunity to acquire a smaller competitor. Banks may not lend for an acquisition due to policy restrictions.
Private credit funds can structure acquisition financing or structured debt backed by business cash flows and assets of the target company.
4. Debt restructuring or refinancing
Private credit can also be used to refinance existing high-cost debt, or replace stressed loans, allowing companies to optimize cost of funds and improve liquidity.
Advantages of private credit for SMEs and Manufacturing firms
- Faster decision-making: Quick approvals compared to banks’ lengthy appraisal cycles
- Flexible structuring: Repayment can be linked to business cash flows or milestones
- No strict collateral norms: Focus on business viability and promoter strength
- Confidential and customized: Private deals that protect business information
- Growth capital without equity dilution: Promoters retain control while accessing funds
Strategy to Avail Private Credit in India
To attract the right private credit investor and secure funding at competitive terms, companies must adopt a structured approach:
- Assess Funding Purpose and Structure
Clearly define the requirement — whether it’s growth capex, bridge financing, acquisition, or refinancing. Private lenders value clarity of end use - Prepare Robust Financial Projections
Build realistic 3–5 year cash flow models demonstrating repayment capacity and business viability - Professional Debt Advisory Support
Engage experienced debt consultants who have access to private credit funds, family offices, and AIFs. A consultant can help structure the deal, prepare investor presentations, and negotiate terms - Transparent Governance and Reporting
Private investors prefer businesses with clean accounting, transparent governance, and professional management - Leverage Relationships and Speed
Having the right advisory partner helps connect you with the most suitable private credit provider quickly — often saving months of delay
How Funding Walk helps companies raise private credit?
As consultants specializing in debt syndication and private credit advisory, we assist SMEs and manufacturing firms in:
- Identifying suitable private credit funds and investors
- Structuring customized financing solutions (secured, mezzanine, or structured debt)
- Preparing financial models and investor decks
- Negotiating favorable terms and faster closures
We have successfully raised funds for companies across manufacturing, EV, MSME, real estate, and NBFC sectors — ensuring optimal cost, structure, and flexibility.
Conclusion
Private credit is emerging as a vital lifeline for India’s growth-focused SMEs and manufacturing firms. Whether it’s expansion, acquisition, or working capital — private credit offers the flexibility and speed that traditional lending often cannot.
With the right advisory partner, companies can access institutional private capital at the best terms, unlocking growth without compromising control.