Why Do Businesspeople Prefer Private Debt to Private Equity?

[Suba]

Private debt is a form of business loan or financing generally provided by non-bank financial institutions, private credit funds, business development companies, individual investors, or wealthy individuals. Therefore, private debt is not obtained through the capital markets or through an IPO. Furthermore, private debt can be negotiated directly according to the borrower's financial situation, including the installment amount and loan term.

 

[gwolf666]

Private debt is a concept that is increasingly heard in the financial world, and I think it is important to understand their differences against other types of financing. Basically, it is a loan or financing that does not come from traditional banks or capital markets, as with bond emissions or initial public offers. On the other hand, these loans are granted by private financial institutions, credit funds, business development companies, individual investors or people with high assets.
One of the advantages I see in private debt is flexibility. Not being regulated by the traditional market mechanisms, the agreement can be much better adapted to the specific situation of the borrower. This includes aspects such as the amount of the quotas, the loan deadlines or even some particular conditions that allow a greater margin of maneuver for the company requesting the financing.
On the other hand, it also implies certain risks. Being more personalized and less regulated financing, it can be more expensive in terms of interest, and is not always available for all companies. However, for businesses that need fast capital or do not have access to traditional banking, it can be a very useful tool.