Mezzanine and private credit (larger companies)
Tailored loans from specialist funds rather than banks, for established companies, often for acquisitions, expansion or refinancing. Flexible and larger than bank lending allows, but more expensive, and mezzanine can turn into shares if you cannot repay.
- Secured on assets
- Debenture (charge over company assets)
How it works
Private credit (also called private debt or direct lending) is lending by a fund or other non-bank lender, negotiated directly with you and tailored to your needs. Funds pool money from investors such as pension funds and lend it to businesses.
- Loans typically range from £10 million to £250 million, last three to seven years, and have a variable interest rate.
- Many deals repay much of the loan in one lump sum at the end (a bullet repayment), which leaves cash for growth in the meantime.
- Lenders look closely at EBITDA, how much debt you already have compared with your earnings, and the value of any security.
Mezzanine finance sits between debt and equity. It ranks behind the senior lender (often a bank) if the business fails, so it charges more interest. If you cannot repay, the lender may be able to convert what is owed into shares. It is often used to fill a gap, for example when a bank lends only part of a project and shareholders provide some more.
Upsides and downsides
Upsides
- More flexible and tailored than bank lending
- Larger amounts than one bank may lend
- You keep control, unlike selling shares
- Bullet repayments leave cash for growth
Downsides
- Costs more than bank lending
- Detailed due diligence and covenants
- Mezzanine can convert into shares if you cannot repay
Risks
- A large repayment falling due at the end of the loan
- Assets put up as security being at risk if you default
- Too much debt if trading falls
What it costs
- How it is priced
- Interest (often variable) and fees; mezzanine charges more than senior debt
- Costs that are easy to miss
- Arrangement and due diligence fees
- Charges for late or early repayment
- Mezzanine lenders may take shares if you cannot repay
Private credit loans typically range from £10 million to £250 million. Mezzanine can be smaller.
Does it fit?
Could fit when
- You are an established, profitable company that needs a large or tailored loan
- You are buying a business or refinancing, and a bank will lend only part of what you need
Unlikely to fit when
- You are a small business (most private credit is for larger, established companies)
- You are loss-making
Who can use it
- Business types: Private limited company, LLP, Public limited company
- Usually needs a profitable business
- Usually established businesses with assets and a trading history
- Lenders assess EBITDA, existing debt and the value of security
- Each fund sets its own criteria, and many specialise in particular sectors
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all asset-based and specialist lending
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- Audited accounts
- Financial model
- Existing debt and security
Regulation and protections
Commercial lending to companies is not generally subject to statutory conduct regulation. Your protection comes from the loan documents, so take legal and financial advice.
Types of provider: Private credit and direct lending funds; Mezzanine funds.
Also consider
Sources
- British Business Bank: What is private credit? · checked 7 October 2026
- British Business Bank: Is mezzanine finance right for your business? · checked 7 October 2026
- British Business Bank: Direct lending funds · checked 7 October 2026