What is private credit?

🏦 Private Credit 101

Private credit or Alternative Debt refers to debt investments that are made directly into private companies — typically outside of traditional banking channels or public bond markets. Unlike public credit (e.g. corporate bonds), private credit is negotiated bilaterally, structured with flexible terms, and often collateralized with cash flow, assets, or business receivables.

Private credit is used by businesses that are too large for microloans but too small or non-standard for bank lending. It plays a vital role in funding growth, acquisition, working capital, and refinancing — often at higher yields than traditional fixed income.

These can include:

• Mezzanine debt

• Distressed debt

• Private credit

• Structured credit from non-bank lenders or investment funds

For tokenized strategies like Chateau’s, this market opens the door to digitizing real yield and bringing institutional strategies on-chain — with transparency, automation, and broader accessibility.

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Key Characteristics:

• Typically less liquid than traditional debt

• Offered by non-bank lenders or specialized credit funds

• Reduced volatility compared to equities

• Targets non-standard borrowers or higher-yield use cases

• Exposure to real economic activity that isn’t correlated with public markets

• Offers higher returns than public fixed income, but comes with increased risk

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Use Cases: Ideal for investors and companies seeking:

• Customized risk-return profiles

• Access to capital not served by traditional banks

• Exposure to yield-generating debt with enhanced spreads

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📊 APR Ranges by Loan Type (Sample Data)

Loan Type	Approx. APR
Bank small-business loan	4.90% – 9.83%
Online term loan	6% – 99%
SBA loan	10% – 12.5%
Business line of credit	10% – 99%
Invoice factoring/financing	10% – 79%
Merchant cash advance	40% – 350%

Source: NerdWallet, 2/7/2023: Average Business Loan Rates 2023:

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