Private credit is a plain idea with a complicated reputation. It is business lending funded by private capital, whether a family office, a fund or a group of partners, rather than by bank deposits. Because the capital is private, the lender sets its own policy, moves at its own speed and can structure around a specific business rather than a category.
How it differs from a bank
- Decisions are made by principals, not credit committees, so a term sheet can arrive in days.
- Underwriting is collateral-first: real estate, equipment, receivables and inventory, with cash flow and the exit close behind.
- Pricing is higher than a bank line, reflecting the risk and the speed, and lower than equity.
- Terms are shorter, usually six to thirty-six months, with a planned exit back to a bank or a sale.
How it is regulated
Commercial lending to businesses in Canada is lightly regulated compared with consumer lending, but it is not unregulated. The Criminal Code caps the annual percentage rate on most loans at 35 per cent, with exemptions for commercial loans of $10,000 or more made to borrowers who are not individuals. Lenders who lend on real estate may need registration under provincial mortgage broker legislation depending on how they operate. Security is registered under each province’s Personal Property Security Act or at the land titles office, and provincial lien legislation governs construction draws. A reputable lender will tell you which of these applies to your loan.
Where it fits
Private credit is not a replacement for a bank. It is what you use when the bank’s timeline, policy or appetite does not fit the situation: a fast closing, a growth spurt, a one-time setback, a succession. Most borrowers use it for a season and return to bank financing with a stronger file.
Have a situation like this? Tell us about the deal and a principal will respond within two business days. Cascade lends to businesses only, in Canadian dollars, and every rate we quote is an annual rate.
