Private Credit Lender: How Middle-Market Borrowing Works

A private credit lender is a non-bank firm, usually a fund or specialist finance company, that makes loans directly to businesses instead of through a bank or public bond market. For middle-market companies, these loans often cover senior debt, asset-based lending, mezzanine debt and acquisition financing. Thrive Funding does not lend money itself. It arranges private credit by matching one application to lending groups whose criteria fit the deal.

What a private credit lender does

A private credit lender takes on the credit risk of a loan and sets the terms: amount, interest rate, repayment schedule, security and covenants. The lender decides whether to approve a deal.

The market is large. According to the Federal Reserve, private credit generally refers to direct loans made to mid-market businesses, typically by non-bank lenders. The same Fed note says the asset class totaled $1.34 trillion in the U.S. and nearly $2 trillion globally by 2024-Q2.

The growth has come partly from banks pulling back. KKR notes that when commercial banks reduced lending and syndicated markets slowed during the high-inflation period of 2022 and 2023, non-bank private credit stepped in. KKR also expects global private credit assets under management to reach nearly $3.1 trillion by 2030.

The pattern shows up in deal counts too. MFA reports that over 2,800 mid-cap companies in the U.S. and over 1,000 in Europe received private credit loans during its 21-month study period. Its mid-cap group means companies with valuations between $2 billion and $10 billion, which is larger than many borrowers Thrive works with.

Types of private credit loans

Most private credit lenders offer a few core products. The loan type affects price, security and how much control the lender takes.

Loan type	What it is	Typical use
Senior debt	First claim on company assets and cash flow	Refinancing, growth capital, add-on acquisitions
Asset-based lending (ABL)	Loan sized against receivables, inventory or equipment	Working capital for companies with large asset bases
Mezzanine debt	Subordinated to senior debt, often with higher returns for the lender	Filling the gap between senior debt and equity
Acquisition financing	Loan to buy another business	Buyouts and add-on purchases
Unitranche	One loan that combines senior and junior debt in a single facility	Large deals that need one lender and one set of terms

Unitranche deals show the scale of this market. In one example on Paul Hastings' practice page, a $1.3 billion financing consisted of a $1.2 billion senior secured term loan facility (unitranche) and a $100 million senior secured non-amortizing revolving credit facility. Most borrowers do not need a deal that size, but the example shows how one lender group can finance a whole capital structure.

How a borrower finds a private credit lender

There are three common routes.

1. Approach a lender directly. Private credit funds and specialist lenders accept inbound requests, but each has its own size, sector and state rules. A borrower who approaches one lender sees only that lender's answer.
2. Work with a bank or advisor. Banks may refer deals they cannot fit, and M&A or capital advisors often know which funds are active. This takes time and depends on existing relationships.
3. Use a placement service. A broker such as Thrive Funding takes one application and sends it to lending groups whose criteria match. The borrower then compares the terms each lender issues.

Whichever route you use, expect the lender to ask for the same core information: financial statements, a description of the business and its industry, the purpose of the loan, the amount, and any collateral.

What lenders look at

Lenders assess the same basic factors in most deals:

• Deal size. Each lender sets a range. A request below its minimum will not be considered.
• Earnings. Lenders often set minimums for revenue and EBITDA. Thrive's process checks these against each group's criteria before any intro.
• Industry and location. Some lenders avoid certain sectors or do not lend in some states.
• Loan type and pricing. A group may offer senior debt but not mezzanine, or it may only price certain structures.
• Use of funds and collateral. The purpose of the loan and what secures it both affect the answer.

How Thrive Funding fits in

Thrive Funding (dba II Capital Partners LLC, Miami, FL) arranges private credit for middle-market companies seeking roughly $1 million to $100 million or more. Thrive is not a lender. The lender makes every credit decision.

The process runs in five steps:

1. The borrower submits an application at thrivefunding.com/apply.
2. Thrive compares the request with each lending group's criteria.
3. Groups that fit receive an anonymous deal summary and reply yes or no.
4. Once the borrower agrees, up to three groups that said yes receive introductions, best fit first. Each introduction is a separate email thread, so the groups do not see each other.
5. Lenders issue term sheets on their own letterhead. Thrive sends the borrower a side-by-side summary, and the borrower chooses one.

Some points to keep in mind:

• Any estimate Thrive gives is labeled indicative terms. It is not a term sheet and it is not an offer.
• Every borrower email states that Thrive is paid by its lending partners.
• Lending groups pay Thrive to join its network, but that does not give them priority. Deals go to lenders by fit.
• Requests under $1 million receive an automatic decline.

What to check before you talk to any lender

• Who makes the decision? Ask whether the firm is the lender or an intermediary.
• How are they paid? A fee from the lender, the borrower or both affects how neutral the process is.
• What are the indicative terms? A non-binding estimate is not a commitment. Ask for the written term sheet before you compare.
• Is the loan type right? A senior loan, an ABL facility and mezzanine debt carry different costs and control terms.
• Does the size fit? A lender that rarely does deals at your size will move slowly.

Sources

• Bank Lending to Private Credit: Size, Characteristics, and Financial Stability Implications
• Private Credit Investing: What You Need to Know
• Private credit loans surge 400% across U.S. and Europe
• Direct Lending & Private Credit Lending