The question isn't which is better — it's which is right for your deal, your timeline, and your risk profile. Most business owners approach capital raising with a binary mindset: bank or non-bank. But the reality is more nuanced. Private credit lenders and traditional bank lenders serve different purposes, operate under different constraints, and deliver different outcomes. The best capital source is the one that closes your deal on terms you can live with — and understanding the trade‑offs is the first step to making that choice strategically.
1You Have a Deal on the Line
You're standing at a crossroads. The business acquisition is ready to close. The equipment purchase will double your production capacity. The expansion project has permits approved. But you need capital — and you have two fundamentally different paths in front of you.
One path is familiar: traditional bank lending. Lower rates, established relationships, regulatory oversight. The other path is newer: private credit. Faster execution, flexible structures, higher cost. Both can get you to the same destination. But the journey — and what you give up along the way — is completely different.
The fork in the road: private credit or traditional bank lending — both lead forward, but the path you choose determines your speed, flexibility, and cost of capital.
The mistake most borrowers make is choosing based on assumptions rather than running both processes and comparing real term sheets. The second mistake is choosing based on cost alone without considering speed, flexibility, and deal certainty. The third mistake is not having an advisor who can access both markets and structure the deal to maximize your outcome.
2What Private Credit Actually Is (And What It Isn't)
Private credit is not a monolith. It's an umbrella term for non-bank lenders who provide debt capital outside the traditional banking system. This includes direct lending funds, business development companies (BDCs), family offices, credit funds, and specialty finance companies. Unlike banks, private credit lenders are not deposit‑taking institutions — they raise capital from institutional investors, high‑net‑worth individuals, or their own balance sheets, and deploy it as loans.
Two stacks, two philosophies: traditional bank lending (left) vs private credit structures (right) — same capital need, fundamentally different approaches.
This structural difference creates both advantages and constraints. Private credit lenders are not subject to the same regulatory capital requirements as banks, which gives them flexibility to underwrite deals that banks cannot or will not touch. They can move faster, structure more creatively, and take on more risk — but that flexibility comes at a cost. Private credit is almost always more expensive than bank debt, and the terms are often more aggressive.
The key distinction is this: banks lend based on historical performance and collateral coverage. Private credit lenders lend based on future cash flow potential and deal structure. That difference defines when each makes sense.
3Speed and Flexibility: A Side‑by‑Side Comparison
The most common reason borrowers choose private credit over banks is speed. But speed is not the only difference — and in some cases, it's not even the most important one. Here's how the two compare across the factors that matter most in deal execution:
Two worlds, two philosophies: the traditional bank environment (left) vs the modern private credit workspace (right) — same capital need, fundamentally different execution.
| Factor | Traditional Bank Lending | Private Credit |
|---|---|---|
| Approval Timeline | 60–120 days | 14–45 days |
| Covenant Structure | Tight financial covenants, quarterly reporting | Lighter covenants, more flexibility |
| Prepayment Terms | Often no penalty after 1–2 years | Prepayment penalties common (1–3%) |
| Collateral Requirements | First lien on all assets, personal guarantees | Can be subordinated or unsecured in some structures |
| Relationship Requirements | Deposit accounts, treasury services, cross‑sell expectations | Transactional — no relationship requirements |
| Underwriting Focus | Historical financials, credit score, collateral coverage | Forward‑looking cash flow, deal structure, sponsor quality |
| Cost of Capital | 6–10% (depending on risk profile) | 10–18% (depending on structure and risk) |
4When Private Credit Is the Strategic Choice
Private credit isn't a fallback for borrowers who got rejected by banks. In the right scenario, it's the better path — and choosing it intentionally is a sign of deal sophistication, not desperation.
The knight move: private credit earns its premium when the conventional path won't get you to the close.
Private credit earns its premium when:
Your timeline is the constraint.
A seller has competing offers. A bridge is expiring. A competitive process has a hard close date. If your deal dies at 90 days, a lender who closes in 30 is worth every basis point of premium.
The deal doesn't fit a bank's underwriting box.
Acquisition targets with inconsistent EBITDA, customer concentration, recent ownership transitions, or limited operating history will stall in a bank's credit committee. Private credit lenders underwrite the deal structure and forward cash flow — not just the trailing 3-year average.
You need covenant flexibility to execute your plan.
Turnarounds, add-on acquisitions, and aggressive growth strategies don't pair well with quarterly covenant tests. Private credit structures can be built around your operating plan, not a bank's standard covenant package.
The capital structure requires subordinated debt.
If you're layering mezzanine debt behind senior bank financing, or need a second lien to fill an equity gap, private credit is the only market that provides it. Banks don't do subordinated debt.
The Premium Is the Point
Sophisticated borrowers don't choose private credit despite the higher cost — they choose it because the deal certainty, speed, and structural flexibility are worth the premium. The question is never "is private credit cheaper?" It's "does the deal close without it?"
5How PeerSense Accesses Both Markets
The PeerSense deal desk: running both markets in parallel — bank and private credit — until the right term sheet is in hand.
Most brokers specialize in one market or the other — banks or private credit. PeerSense operates in both, which means we can run your deal through the right channel based on your profile, timeline, and structure.
We start by understanding your deal: What are you financing? What's your timeline? What's your risk profile? What are your covenant tolerance and cost sensitivity? Then we map your deal to the right capital source — or sources.
In many cases, the best structure is a hybrid: senior bank debt with a private credit mezzanine layer, or an SBA 7(a) loan with a private credit bridge to close faster.
Our Bias
We don't have a bias toward one market or the other — we have a bias toward deals that close. If your deal is bank‑eligible, we'll get you bank pricing. If your deal requires private credit, we'll get you the best private credit terms available. And if your deal requires both, we'll structure the stack so each layer plays its role.
The Bottom Line
The best capital source is the one that closes your deal on terms you can live with. Private credit is not better or worse than bank lending — it's different. It serves different deals, different timelines, and different risk profiles. The mistake most borrowers make is choosing one or the other based on assumptions rather than running both processes and comparing real term sheets. The second mistake is choosing based on cost alone without considering speed, flexibility, and deal certainty. The third mistake is not having an advisor who can access both markets and structure the deal to maximize your outcome. If you’re raising capital and you’re not sure whether private credit or bank lending is the right path — the answer is probably both. Run both processes, get both term sheets, and make the decision based on real data rather than guesses. That’s how deals get done.