Private credit and AIF funding: when it fits a promoter’s balance sheet

Private credit funds, Category II AIFs and larger NBFCs have become a meaningful source of debt for Indian businesses that sit outside conventional bank appetite. They are faster and more flexible than banks, and they price that flexibility. The decision is whether the trade is worth making.

Where private credit tends to fit

• Growth or acquisition funding where bank limits are exhausted or too slow.
• A clear cash-flow or asset-backed repayment source but an unconventional profile.
• Bridge, refinancing and structured needs that require tailored tenor and repayment schedules.
• Temporary stress where time is needed to execute a turnaround.

What the lender will test

Cash-flow visibility, security and its enforceability, promoter track record and the quality of financial reporting. Institutional lenders underwrite the downside first, so the structure and documentation matter as much as the headline rate.

Pricing is more than the rate

Fees, security structure, covenants, reporting obligations, prepayment terms and any equity-linked features all form part of the true cost. Comparing term sheets on rate alone is the most common mistake.

The route to a good outcome

Prepare lender-grade financials and an information memorandum, approach a considered shortlist rather than the whole market, and negotiate covenants and security before the term sheet is signed, when leverage is highest. Our debt and structured finance practice →