Private Debt



The banking system of any country is the major contributor to the Economy. Government and Bankers always put the efforts to carry out all the economic transactions through the banking system. Banking system works in a defined framework. And there are always some exceptions to the standard condition. 

Private debt or Private Credit comes into the picture, where the business crosses certain operational limits and cannot fit with the regular banking operations. OR there are certain scenarios of the business where bankers cannot fund. Private debt funding works in unconventional ways. Here are a few of the best conditions where and why alternative investments or Private Debt comes into the picture.

Features of Private Debt are mentioned below:

  • Works under Government Regulations

Private Debt funds work internationally. So they are always very much clear on government rules and regulations. All private debt players are RBI (Reserve Bank of India) and SEBI (Security Exchange Board of India) licence holders. Lenders always make sure the funding should not violate any of the government or RBI norms. It is 100% safe and secure to borrow money.

  • Highly Flexible

Unlike the banking system, the norms in private debt are very much flexible. The solution can be arranged as per the convenience of the client. There is no hard and fast structure to be followed. The amount can be arranged in term loan format or maybe in other required formats, the term can be flexible, the repayment structure can be flexible, the EMI structure can be flexible. So, in short, all the possibilities can be arranged as long as it helps the business to grow.

  • Fast Execution

The turnaround time to execute the proposal under private debt is very shot. It is because there are not many authority levels involved. The structure in the fund houses is very much flat. And the fund houses are very much aggressive about the funding.

  • High Exposure Amount

The private debt players work in international markets with high ticket size. So, there is no upper limit on the required amount. As long as the client matches the expectations and meets the fund houses criteria, there will not be any concern about the upper exposure limit. The fund houses can take exposure up to some thousand crores.

  • No Equity Dilution

The amount is lent in debt format. So there is no question of equity dilution. Lenders will be comfortable as long as they are getting paid for their interest and principle. However, there is always flexibility on the repayment of the debt. The lender may propose for some equity. However, the terms and conditions are mutually agreed. Nothing goes forward unless it is mutually agreed by both the parties.

  • Growth Hacking

When any private debt player infuses funds to any business, they make sure the business must get all the required fuel to grow. The fund houses will make sure, you get connected to all the required major players from the market where you can push the growth.

  • Long Term Association

Long term association helps everyone. Same applies to private debt players. Whenever private debt players infuse the funds, they make sure there should be long term association with the client. So, this will stand a win-win condition to both private debt players and clients.

  • Industry Expert

Private debt players do not infuse the funds unless they are well versed with the industry. So the borrower does not have to put in the effort to make the lender understand about industry challenges. Rather, lenders help the borrower to deal with the industry challenges in the best way possible.

  • Professional Approach

The lenders work across the globe. They understand their areas of expertise and operation. They always have a professional approach to deal with the lender. Lenders will always make sure there should not be any operational obligation to the borrower. So, the borrower can execute the operation in his own style.

FAQs (Frequently Asked Questions)

The funds will be in dollars or rupees?

The debt fund can be arranged in dollars (any other foreign currency) or in rupees, as per the convenience of the borrower. However, it is suggested that in case if the borrower is not exposed to the foreign currency (either through income or expenses), then funding should be taken in rupees only.

What will be the rate of interest?

The rate of interest will be in sync with the Indian economy, inflation rate and MCLR. However, funding currency will be a determining factor.

Is private debt operating in Maharashtra?

As long as the project and business are good, there is no geo limit to it. The private debt funding can be arranged in Pune, Mumbai, Maharashtra and any part of India. The private debt funding can be arranged in any part of India.

What will be turnaround time to process?

As the private credit funds follow the flat operational structure there is no time taking process for the sanctions. It works way faster than normal banking channel operations.

Are the lenders new to Indian Market?

The lenders operate in Indian Market from 1997. The Indian market and the Indian economy is not new to them.

Is collateral required?

Yes. As this funding is in debt format collateral is required. However, there will be total flexibility on the collateral part which can be mutually decided.

Are the Private Debt players following the Legal Framework?

Yes. Very much. Private debt players follow all the rules and guidelines laid down by RBI and the Government of India.

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