Private Credit & Direct Lending
Private credit fills the gap banks leave — and brings its own discipline.
Direct lenders need early visibility into borrower performance. Borrowers need to understand what private credit costs and requires.
How private credit is structured, priced, and monitored
Unitranche and structure
Private credit trades higher pricing for speed, certainty, and leverage.
Read more: Unitranche and structure
Direct lenders commonly provide unitranche, first-lien, second-lien, or asset-based facilities to middle-market companies, frequently sponsor-backed. Compared with bank financing, private credit may offer higher leverage, faster execution, and more flexible structures in exchange for higher spreads, fees, call protection, and tighter reporting. Total cost of capital includes original issue discount, prepayment premiums, and unused fees, so comparing headline rates alone can mislead.
Monitoring and reporting covenants
Lenders rely on monthly borrower reporting to see trouble early.
Read more: Monitoring and reporting covenants
Private credit lenders typically require monthly financial statements, compliance certificates, and sometimes lender calls. Maintenance covenants, where present, test leverage and coverage quarterly; covenant-lite structures rely more on reporting and information rights. Monitoring quality depends on the borrower's finance function. Lean teams can deliver packages that technically comply while obscuring deterioration in working capital, customer concentration, or margin until a covenant breaks.
Amendments, PIK, and stressed credits
Stress is often resolved through amendments rather than defaults.
Read more: Amendments, PIK, and stressed credits
When performance weakens, lenders and borrowers negotiate covenant resets, payment-in-kind interest, equity cures, or additional sponsor support. Each option shifts value and risk between parties. Lenders need independent cash-flow analysis to judge whether a plan is achievable; borrowers need a credible thirteen-week forecast and operating plan. Early, data-based negotiation usually preserves more value than late reaction. Both sides benefit from shared, current facts.
Lender versus borrower representation
Lender advisory and borrower advisory are different engagements.
Read more: Lender versus borrower representation
A direct lender asking for an independent view of a borrower's liquidity and a company comparing private credit with bank financing stand on opposite sides of the same market. Perrin & Co. may advise either, but states at the outset which side it represents and does not act for both parties in the same credit. Neither engagement involves investment advice or capital placement.
Where lenders and borrowers feel pressure
Borrower reporting quality
Monthly packages can comply on paper while hiding trends.
Read more: Borrower reporting quality
Borrowers with thin finance teams may deliver reporting that is late, inconsistent, or lacking variance explanation. Lenders lose early warning; borrowers lose credibility. Improving close and reporting is often the most direct way to strengthen the relationship. Consistent variance commentary is especially valuable.
Stressed credits and amendments
Forbearance decisions need independent, current analysis.
Read more: Stressed credits and amendments
Covenant breaches lead to negotiations over resets, fees, payment-in-kind interest, and sponsor support. Without an independent liquidity forecast and operating plan, both sides negotiate on assumptions. Timely analysis improves the quality and speed of decisions. Delay typically increases cost for lenders and borrowers alike.
Bank versus private credit decisions
Borrowers often compare offers on headline rate alone.
Read more: Bank versus private credit decisions
Private credit can close faster and offer more leverage, while banks may offer lower cost with tighter structure. Borrowers should compare total cost, covenants, reporting burden, call protection, and the path back to bank financing before choosing. The cheapest option today is not always the least expensive over the hold period.
Portfolio-level visibility
Platforms need consistent data across many borrowers.
Read more: Portfolio-level visibility
Direct lending platforms aggregate exposures across sectors and sponsors. Without standardized data, trends by industry or vintage are hard to see. Portfolio monitoring processes and templates help credit teams identify correlated risk earlier. Standard reporting templates also reduce the burden on borrowers and make cross-portfolio comparison possible.
Sponsor support and alignment
Sponsor willingness to support a credit shapes outcomes.
Read more: Sponsor support and alignment
In sponsor-backed credits, the sponsor's capacity and willingness to inject equity affect recovery. Lenders and borrowers both benefit from understanding fund life, remaining capital, and portfolio priorities when planning for stress. A sponsor near the end of its fund life may have different priorities than one early in its investment period.
Refinancing and maturity
Higher-cost debt should have a planned exit.
Read more: Refinancing and maturity
Borrowers that accept private credit to solve a temporary problem need a credible path to refinance as performance improves. Call protection and market conditions affect timing. Forecasts should show when leverage and coverage could support lower-cost financing. Call protection schedules should be part of that plan.
Lender-side or borrower-side advisory, clearly separated
Capital Structure & Financing
Borrower-side comparison of bank and private credit, and diligence preparation.
Read more: Capital Structure & Financing
For companies, Perrin & Co. compares financing alternatives on total cost, covenants, and flexibility and prepares management for lender diligence, acting as borrower representative. Perrin & Co. states at the outset whether it is advising the institution or the borrower and does not act for both sides of the same credit. The firm does not place or arrange debt.
Lender-Side Credit Review
Independent borrower cash-flow and liquidity reviews for direct lenders.
Read more: Lender-Side Credit Review
For lenders, Perrin & Co. can provide independent reviews of a borrower's cash flow, liquidity, and operating plan on watch-list credits, and help design portfolio monitoring processes. These engagements are for the lender and are disclosed as such; they are not investment advice.
Business Advisory
Performance improvement plans for underperforming businesses.
Read more: Business Advisory
Where a credit is underperforming, financial decision support identifies operating, working-capital, and cost levers and turns them into a plan that management, sponsor, and lender can evaluate. Recommendations focus on cash generation and realistic timing rather than optimistic projections. Plans are built with the people responsible for delivering them.
Finance & Accounting Advisory
Interim finance leadership to stabilize borrower reporting.
Read more: Finance & Accounting Advisory
When the borrower's finance function is the problem, interim CFO or controller leadership can stabilize close, reporting, and forecasting. That leadership is engaged by and accountable to the company, which helps rebuild credibility with lenders through consistent, timely information. The work is designed to hand off cleanly to permanent staff.
Where to start
- Capital StructureLender-side monitoring and borrower-side financing strategy.
- Business AdvisoryPerformance improvement for underperforming credits.
Institution advisory vs. borrower advisory. Perrin & Co. is not a bank, lender, broker-dealer, registered investment adviser, or licensed insurance producer, and does not provide regulatory examination, legal, or attest services. For financial institutions, our work is limited to financial, operational, credit-process, and governance advisory to management and boards. For borrowers and investors, our work is borrower-side or company-side advisory. We identify which side we represent at the outset of every engagement.
More in Financial Services
- Commercial Banking
- Credit Unions
- Specialty Finance
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- Investment Management
- Insurance & Financial Services
- Financial Technology (Fintech)
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