By John Felix, Managing Director and Head of Originations at White Oak Global Advisors --
Over the past decade, private credit has steadily displaced commercial banks as a primary source of financing for industrial manufacturers and distributors. Once considered an alternative reserved for smaller or highly leveraged borrowers, private credit has matured into a mainstream funding solution for mid-market and large industrial companies seeking flexibility, speed, and certainty in their capital structures.
For CFOs managing complex balance sheets, supply chain uncertainty, and evolving growth opportunities, this shift represents more than a financial trend — it’s a fundamental reordering of the corporate lending landscape.
Banks Step Back, Private Lenders Step In
The post-2008 regulatory environment reshaped the lending capacity of commercial banks. New capital and liquidity requirements under Basel III and related regulatory frameworks forced banks to hold more capital against loans and limit exposure to non-investment-grade borrowers. For cyclical industries like manufacturing and distribution, this has meant tighter covenants, lower leverage availability, and longer approval cycles.
Even well-run industrial companies now find banks less willing to underwrite bespoke financing, preferring instead to focus on low-risk revolvers or asset-based facilities. This retreat has left a widening credit gap—and private credit funds have stepped forward to fill it.
The Rise of Private Credit as a Strategic Partner
Private credit funds, typically backed by institutional investors such as pension funds and insurance companies, operate outside the same capital constraints as banks. This allows them to structure customized financing solutions, often combining senior and subordinated debt into a single facility and offering borrowers greater flexibility around use of proceeds, covenants, and amortization.
For industrial CFOs, the appeal is clear:
- Faster execution: Private lenders can close transactions in weeks, not months.
- Tailored structures: Financing can be customized for acquisitions, recapitalizations, or growth initiatives.
- Certainty of funding: No syndication risk; commitments are typically held by the lender through maturity.
- Relationship-driven approach: Many private credit firms view themselves as partners, not just capital providers.
In an environment where supply chains, labor costs, and interest rates remain volatile, that flexibility and certainty can make the difference between executing a strategic initiative—or missing it.
Balancing Cost and Flexibility
Private credit typically carries a marginally higher coupon than traditional bank debt, but CFOs are increasingly evaluating total value, not just cost. The ability to secure a larger facility, reduce covenant restrictions, or execute quickly often outweighs the incremental interest expense.
Private credit can be especially valuable in situations where:
- The company is pursuing a leveraged acquisition or management buyout.
- Capital expenditures must move forward despite market dislocation.
- Cash flows are temporarily uneven due to commodity pricing or supply chain disruptions.
Most loans in this space are floating-rate, which provides natural alignment with current interest rate conditions and allows CFOs to manage debt service costs more dynamically.
Institutional Capital Is Deepening the Market
The expansion of private credit is being fueled by global investor demand for yield and diversification. With traditional fixed-income markets offering lower real returns and greater volatility, institutional investors have poured capital into private credit strategies for their steady income streams and risk-adjusted performance.
This influx of capital has increased competition among private lenders, driving more borrower-friendly structures and greater market liquidity. For industrial borrowers, that means:
- Broader access to capital, even when banks tighten credit.
- More sector-specific expertise, as lenders specialize in industrial and manufacturing segments.
- Improved pricing power, as competition among funds pushes spreads lower.
Integrating Private Credit into Your Capital Strategy
For industrial CFOs, private credit is no longer a “last resort” or niche solution—it’s a strategic component of the modern capital stack. Leading finance teams are leveraging it to complement traditional bank relationships and position their companies for flexibility and growth.
Key considerations for CFOs include:
- Relationship building: Establish connections with private lenders before you need capital.
- Capital stack optimization: Combine bank revolvers for working capital with private term loans for growth or acquisitions.
- Long-term flexibility: Evaluate not only pricing but also repayment structure, covenants, and lender partnership fit.
- Strategic readiness: Maintain financing agility to act quickly on M&A or expansion opportunities.
By viewing private credit as a partner rather than a transactional counterparty, industrial CFOs can strengthen their financial agility and strategic positioning—particularly in an era when banks’ capacity to lend remains constrained.
The Bottom Line
Private credit’s rise is not a temporary market response — it’s a structural evolution in how capital flows from investors to operating businesses. As banks focus increasingly on lower-risk and transactional lending, private credit funds are stepping into the role once dominated by commercial lenders, offering tailored, relationship-based solutions that align more closely with the realities of today’s industrial economy.
For CFOs, adapting to this shift means embracing a broader, more flexible financing toolkit. Those who cultivate relationships with private lenders early—and understand how to use private credit strategically — will be best positioned to fund growth, navigate volatility, and sustain competitive advantage in a changing financial landscape.
John Felix is the Managing Director and Head of Originations at AEM member company White Oak Global Advisors, a leading global private credit firm specializing in financing solutions for middle-market companies. With over three decades of experience in structuring and originating customized credit facilities across the industrial, manufacturing, and distribution sectors, Felix partners with management teams and financial sponsors to deliver capital that drives growth, stability, and long-term enterprise value.
