What Is Private Credit?
A Guide for Australian Investors

Introduction

Private credit has become an increasingly recognised part of theAustralian investment landscape, but the term is still unfamiliar to many investors.

At its simplest, private credit refers to lending that takes place outside the traditional banking system. Rather than a bank providing the capital to a borrower, funding may be provided by private investors through a specialist private credit manager.

How does private credit work?

Private credit can take many different forms.

Loans may be provided to businesses, property developers, investors or other commercial borrowers. Depending on the transaction, the loan may be secured by assets such as real property.

A private credit manager will generally assess a lending opportunity before deciding whether to provide funding. This assessment may include consideration of:

• the borrower and guarantors;
• the purpose of the loan;
• the value and nature of any security;
• the proposed loan-to-value ratio;
• the borrower's proposed repayment or exit strategy;
• the term of the loan; and
• the risks associated with the transaction.

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Conclusion

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