Private Credit: The Global Lending Gap Filler

In today's rapidly evolving financial landscape, traditional banks are no longer the primary providers of capital. Risk-averse banking systems, increasingly constrained by regulatory pressures, are struggling to meet the rising demand for flexible financing. This has opened the door for private credit lenders, like SC Lowy, to fill the void with customized, adaptable financing solutions.



The global lending gap has been driven by several factors, most notably heightened regulatory requirements under frameworks like Basel III. These regulations impose strict capital reserve requirements, limiting banks' capacity to issue corporate loans. As a result, traditional banks are retreating from many sectors of the lending market, leaving businesses, particularly mid-size corporates, underserved.

Private credit is stepping in to bridge this gap, emerging as a vital alternative. By offering tailored financing solutions that banks often cannot provide, private credit providers are addressing unmet borrower needs and reshaping the global capital landscape. They offer faster approvals and more customized financing structures, with approval timelines typically ranging from four to eight weeks, significantly shorter than the three months or more required by most banks. Private credit firms also provide diverse loan structures, such as cash-flow-based and asset-backed loans, enabling them to cater to businesses with unique financial needs.

The demand for private credit is particularly strong in emerging markets, with the Asia-Pacific (APAC) region being a prime opportunity due to its expected contribution to up to 70% of global GDP growth. In these markets, traditional banking systems often fall short, and private lenders must leverage deep sector expertise and local market knowledge to navigate complex regulatory environments and deliver effective lending solutions. Firms with a local presence across the region, like SC Lowy, have an enhanced competitive edge.

India serves as a standout example, with its booming economy, improved legal system, growing middle-class, and heavily regulated banking sector. Private credit firms targeting short-to-medium term senior secured lending opportunities in India can achieve internal rates of return (IRRs) of 17-22% in local currency, translating to approximately 15-20% in USD. This attractive risk-return profile highlights the significant opportunities emerging across dynamic economies, underscoring the critical role of private credit in meeting demand where traditional financing falls short.



In addition to emerging markets, private credit is also an attractive alternative in mature markets like North America and Europe. In these regions, private credit firms are bridging the funding gap by offering customized, flexible financing solutions, enabling businesses to expand, innovate, and build resilience in challenging economic environments.

To succeed in these environments, private lenders must possess deep sector expertise and local market knowledge. For instance, in India, understanding the nuances of the heavily regulated banking sector and navigating complex regulatory environments is crucial. Similarly, in other emerging markets, private lenders must be well-versed in local market conditions, cultural aspects, and regulatory requirements to effectively deliver lending solutions tailored to the unique needs of borrowers.

In conclusion, private credit is filling the global lending gap left by traditional banks, offering faster approvals, diverse loan structures, and a higher risk tolerance. This alternative financing option is particularly strong in emerging markets and is an attractive alternative in mature markets as well. To succeed, private lenders must leverage deep sector expertise and local market knowledge to navigate complex regulatory environments and deliver effective lending solutions.