Why Companies Choose Private Credit: Speed, Flexibility, Certainty, and Resilience

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Companies may choose private credit because it can provide faster evaluation timelines, clearer execution requirements, specialized underwriting designed for their business type, and financing structures tailored to their operating model, assets, and cash flow. Private credit is not automatically the least expensive financing option, nor is it appropriate for every company or financing need. The decision depends on the company's profile, the financing objective, lender fit, and market conditions at the time of outreach.

Market Context: Scale Does Not Eliminate Selectivity

Private credit has become an important source of financing for below-investment-grade companies. Federal Reserve analysis reported that private credit loans represented approximately $1.4 trillion, or about 10% of the debt of U.S. nonfinancial corporations, based on data from the second half of 2025.

Capital availability remains substantial. S&P Global Market Intelligence reported approximately $385.28 billion of global private-credit dry powder at the beginning of 2025. However, capital available to private-credit managers is not automatically available to every company. Each lender must still apply its underwriting standards, portfolio limits, return requirements, and investment mandate.

Recent defaults and allegations involving fraud or accounting manipulation have also reinforced the importance of reliable financial information and disciplined underwriting. These events do not eliminate private credit's potential benefits, but they demonstrate why speed and flexibility must remain consistent with diligence and credit discipline.

Speed: A More Concentrated Decision Process

Private credit managers typically operate with smaller investment teams and a more concentrated decision-making structure than large commercial banks. This can enable earlier feedback on whether a transaction fits the lender's mandate, more direct communication during diligence, and faster progression through evaluation. However, private credit still requires thorough diligence and investment-committee approval. Speed depends on the quality and completeness of the company's preparation, lender fit, and the lender's current pipeline.

Companies that arrive at a lender conversation well-prepared—with clear financial information, an articulate financing request, and a coherent credit narrative—are more likely to receive timely and substantive feedback.

Certainty: Transparency Matters

Closing certainty in any financing process depends on a number of factors that companies should evaluate before selecting a lender. These include the lender's approval process and remaining diligence requirements, the closing conditions in the term sheet, documentation requirements and timeline, circumstances that could change terms after a letter of intent is signed, and any syndication, co-investment, or third-party funding requirements.

Private credit managers that hold the entire commitment on their own balance sheet may offer more predictable execution than structures that depend on syndication or participation from multiple capital sources. Companies should ask lenders directly about their approval and funding process before committing to an exclusive process.

Flexibility: Structure Should Reflect the Business

Private credit lenders can often structure financing in ways that reflect a specific company's operating model, asset base, and strategic plan. Structural elements that may be negotiated include amortization schedules, delayed draw commitments, acquisition facilities, working capital components, covenant packages, collateral requirements, prepayment terms, reporting obligations, maturity dates, and permitted acquisition baskets.

Not every lender will accommodate every structural request. The lender's experience with the company's industry, business model, and financing type matters when assessing which structural terms are realistic to negotiate.

Resilience: The Company Must Remain Able to Operate

Financing resilience requires that the company remain able to operate through the life of the debt. A sound financing structure should preserve adequate liquidity, manageable debt service at both base-case and stress-case performance, meaningful covenant headroom, working capital availability, sufficient capacity for planned capital expenditures, and a realistic path to repayment or refinancing at maturity.

Companies should evaluate not only whether a lender will provide the requested capital, but whether the resulting debt structure is sustainable under realistic operating scenarios. A financing that looks attractive at close can create constraints that limit strategic options or require an early refinancing on unfavorable terms.

Private Credit Is Not One Uniform Market

Private credit encompasses a wide range of lenders with meaningfully different mandates. Lenders differ by transaction size, minimum EBITDA or revenue thresholds, industry focus, ownership structure requirements (privately held versus sponsor-backed), collateral type, maximum leverage, geography, acceptable use of proceeds, hold size limitations, return requirements, and internal decision processes.

A lender that is well suited to a $20 million term loan for a sponsor-backed software company may not be a candidate for a $5 million asset-backed facility for a founder-owned manufacturer. Understanding the actual lending criteria of individual lenders—not just their general category—is necessary to identify which firms are genuinely appropriate for a given financing.

Why Lender Fit Matters

Broad lender lists often include firms that will quickly decline a transaction because it falls outside their stated mandate. A targeted shortlist of lenders whose criteria match the specific company, transaction size, industry, and ownership structure produces better outcomes than a wide outreach that generates low-quality responses and consumes management time.

Lender fit also affects the quality of the process. A lender that has underwritten similar transactions in the same industry can move through diligence more efficiently, ask more relevant questions, and provide more predictable feedback on structure and terms.

What Companies Should Compare

When evaluating competing proposals, companies should compare total proceeds available under each structure, cash interest rate and any payment-in-kind (PIK) interest component, upfront fees and origination costs, original issue discount (OID), amortization schedule and mandatory repayment requirements, maturity date, financial covenants and their headroom at close, collateral package and guarantee requirements, prepayment premiums and call protection, ongoing reporting obligations, consent requirements for common corporate actions, and the conditions that must be satisfied to fund the commitment.

Total cost of capital and structural constraints should be evaluated together. A lower headline rate with more restrictive covenants, higher fees, or a shorter maturity may be more expensive on a total-cost basis than a higher-rate structure with more operational flexibility.

How Jannu Capital Supports the Process

Jannu Capital helps lower-middle-market and middle-market companies generally seeking $2.5 million to $50 million or more of financing, with selective exceptions.

Jannu Capital assists with financing readiness assessment, capital structure evaluation, lender identification, targeted outreach to lenders whose mandates align with the company's profile, proposal comparison across competing term sheets, and process coordination through closing. The objective is to help companies approach the right lenders with a well-prepared financing request, compare proposals on an apples-to-apples basis, and understand what they are agreeing to before committing.

Jannu Capital is an advisor, not a lender. It does not make credit decisions and does not guarantee lender interest, financing terms, or transaction completion.