Private Debt is Exploding
Private credit has exploded over the past decade, swelling from niche lending to a $2 trillion industry (10x’ed from 2009 to 2024). As banks retreat from riskier lending, private lenders are stepping in, offering solutions that are game-changers for those navigating the SME market, particularly in leveraged buyouts (LBOs).
Banks Out, Private Credit In
For years, banks dominated LBO financing.—and were stingy when it came to the SME segment of the market. Today, with weaker balance sheets and an asset-bubble hangover, banks are reducing risk and pulling back. That void is being filled by private credit. Nonbank lenders have fewer regulatory constraints and can offer tailored financing—flexible terms, faster approvals, and structures that suit the idiosyncrasies of smaller businesses. It’s a lifeline for buyers who need capital but don’t meet the rigid criteria banks demand.
LBO Buyers Reap the Benefits
For buyers looking to acquire small businesses, private credit is the perfect match. Here’s why:
Flexibility: Private lenders can craft financing structures that fit the deal, whether it’s longer repayment terms or more creative covenant options. Buyers can focus on growth, not just servicing debt.
Speed: With private lenders, you’re not stuck in a bureaucratic quagmire. The decision-making process is faster, giving buyers an edge in competitive markets.
Focus on Cash Flow, Not Collateral: Unlike traditional banks that demand heavy collateral coverage, private lenders can focus more on cash flow and potential. This is a huge plus for businesses without large assets.
Opportunities and Risks
Private credit isn’t without risks—higher interest rates could strain some borrowers. But for savvy buyers, these are manageable. What really matters is how private lenders open the door to tailored financing for businesses that don’t fit into the standard mold.
In short, private credit is reshaping the SME LBO market. For buyers, it means fewer hurdles, faster deals, and more customized solutions. The days of being locked out by traditional banks are over—private credit is here to stay.
This sector is expanding fast, and those who move quickly will reap the rewards. Want to buy an SME? Private credit should definitely be in the mix.
One of the goals of DIY Business Buying is to collect contact information on nonbank lenders for easy access by our members.
We have identified 16 private lenders you can potentially reach out to. They are listed on the DIY Business Buying web site. But we are also adding to the list all the time.
To become part of the conversation… join our DIY Business Buying Facebook Group.
Join our Free Deal Review Zoom call at 11am every Wednesday! You can get your own deal reviewed as well.
If you want help on your deal… valuing the business, flagging issues, creating an offer, determing working capital required, or just another set of eyes on your deal… just book a time for a Zoom meeting… uber simple.