What is Driving the Growth in Private Credit Business Finance?

Private credit finance has quickly become a major part of the UK’s financial landscape. Its expansion has changed the ways in which businesses approach funding and is creating opportunities beyond traditional banks and lenders. But what is actually fuelling this growth? Let’s take a look at some of the most important factors behind the shift.

The Increased Demand for Flexible Business Finance

One major driver behind the rise of private credit is the increased demand for flexible funding options. Traditional financial institutions tend to have more rigid lending criteria; they can also hamper you with extensive paperwork and slow decision-making processes. Conversely, private credit offers more bespoke terms tailored specifically to a business’s unique requirements. Companies today need quick access to funds if they’re going to seize opportunities promptly, which makes agility a top priority.

You can also usually get decisions made faster.

Speed has always been an important factor in commerce, but in the modern world, it’s even more crucial. Businesses often need to move rapidly to secure competitive advantages. Private credit firms are typically smaller and more agile compared to banks, which means you can sit down with them and get to grips with what you need and when you can get it, much faster. This accelerated process is perfect for businesses looking to secure timely funding, driving greater interest in private financial services.

There Has Been a Shift in Lending Patterns Post-Pandemic

The aftermath of the pandemic has transformed how businesses view and manage their finances. Traditional lenders became more cautious during this period, tightening their lending conditions a lot. The result of this is that businesses sought alternative funding routes, turning increasingly towards private credit providers. This shift, initially driven by necessity, has become a permanent change, boosting the popularity of alternative business finance sources.

Support for Growing SMEs and Mid-Market Firms

Small and medium-sized enterprises (SMEs) and mid-market firms are some of the cornerstones of the UK’s economy, but they often face barriers when accessing traditional bank financing. Asset finance and private credit providers are often better positioned to support these sectors by offering loans secured against business assets or tailored business asset finance solutions.

Increased Investment from Institutional Investors

Another significant factor behind the growth of private credit is increased investment interest from institutional investors. Pension funds, insurance companies, and other large-scale investors are allocating more resources towards private credit. This is most likely a result of the stable returns and consistent performance compared to traditional markets, meaning that investors have boosted the available capital and driven further expansion within the sector.

A Volatile Global Market Encourages Diverse Finance Options

Global economic volatility is something the business finance sector has been experiencing for some time, and it’s not set to change anytime soon. This has underscored the importance of diversifying financial sources, as relying solely on traditional banking channels has become riskier. As a consequence, businesses increasingly prefer diversified funding strategies, including private credit and business asset finance, to reduce exposure to any single source of finance. This strategic approach enhances financial stability, making private credit more attractive.

Growing Understanding and Awareness

There has been a notable uptick in the awareness and understanding of private credit solutions and asset finance in recent years. Businesses and financial advisors tend to show a greater knowledge of alternative finance options and are clearer with their clients and partners about the benefits and possibilities offered by alternative funding. This enhanced understanding has reduced previous hesitancies or scepticism, driving more businesses towards these innovative funding solutions.

Compelling Returns and Attractive Terms

Asset finance and private credit providers often present more attractive terms compared to traditional bank-oriented finance options. Repayment schedules are frequently more aligned with a company’s cash flow patterns, and tailored solutions can be provided to the business.

In terms of business asset finance specifically, you’re able to make the process much more straightforward when you work with a specialist supplier. They can get to know your business, your needs, and your company’s reality before advising you on the best course of action.

How Bluestar Business Finance Can Support Your Asset Finance Needs

Bluestar Business Finance specialises in tailored asset finance solutions designed to help businesses thrive. We have a deep understanding of many diverse industries and a real commitment to person-centred customer care. Whether you’re looking for leasing, hire purchase, or loan solutions, we can offer you fast decisions, small deposits, and straightforward, simple processes.

Haseeb Qureshi, Director of Bluestar Business Finance: “We provide solutions to our customers, and part of what makes the team at Bluestar great at what they do is ensuring the finance on offer is tailored to our customers’ needs. We have a range of traditional and non-traditional financial institutions we partner with, catering for finance solutions across the UK.”

If you want to find out more about how we can help your business, get in touch with our team through our website or call us on 01256 581 111.

FAQs

What exactly is private credit?

Private credit generally refers to loans or debt provided by non-bank institutions directly to businesses.

Are interest rates typically higher in private credit than in traditional banks?

Interest rates in private credit can sometimes be slightly higher due to the flexibility and bespoke nature of the lending. The

Is private credit suitable for all business types?

Companies needing quick decisions, flexible terms, or those facing challenges obtaining traditional financing typically benefit the most.

Can start-ups access private credit solutions easily?

Start-ups can access private credit, though terms and conditions might be stricter. Demonstrating a clear business plan, solid forecasts, and viable collateral often helps secure favourable terms.