Private credit describes lending arranged outside the public bond markets, usually directly between a lender and a borrower. Its growth over the last decade has been driven in large part by the retreat of high street banks from smaller-scale development and business lending, which left creditworthy borrowers underserved.
Where such a lending business is used to pursue a Business Relief objective, two things have to hold simultaneously: the company must be genuinely trading rather than simply holding investments, and the investor must hold the shares for the qualifying period and still hold them at death.
A lender's position in the capital structure is materially different from an owner's. A secured lender ranks ahead of equity and is paid first if a borrower fails. That does not remove risk — recovery depends on the value and enforceability of the security — but it is a different risk profile from taking development profit.
The structural questions to put to any private-credit provider: where does deal flow originate, who takes the credit decision, what security is taken and at what ranking, what loan-to-value discipline applies, is drawdown staged against progress on site, who carries out valuation, and who handles recovery when a loan goes wrong.
Return composition is worth interrogating too. Interest, arrangement fees and exit fees behave differently from capital appreciation, and a strategy built on lending income does not depend on asset prices rising. Any stated target return is a target rather than a guarantee, and it reflects risk in equal measure.
[Structural detail relating to specific propositions to be supplied from final product documentation. Target returns, fee levels and loan-to-value limits should be taken from the current offer documents rather than from this article.]