How to Invest in Private Credit: A Beginner’s Guide

 Remember when getting a business loan meant sitting in a bank office, filling out endless paperwork, and waiting weeks for an answer? Those days feel like ancient history now.

Over the last ten years, we’ve watched private equity investment and private credit completely reshape how companies get funded. And honestly? It’s been fascinating to witness from the front lines.

At Arbour Investments, we’re being asked about investing in private credit more than ever before. Banks have gotten pickier about who they’ll lend to, while businesses need money faster and with fewer strings attached. Private credit has stepped up to fill that gap – and the returns have caught everyone’s attention.

Let’s Start Simple: What Actually Is Private Credit?

Think of private credit as cutting out the banking middleman. Instead of companies borrowing from traditional banks, they get loans directly from private equity investment firms or other non-bank lenders. These loans don’t get bought and sold on public markets like stocks or bonds. Instead, the terms get customized to fit exactly what the borrower needs.

You might be wondering what a private equity firm is at this point. Picture it as a company that gathers money from investors (like a giant investment pool), then uses that money to buy businesses, invest in them, or – in this case – lend to them. Private credit is just one tool in their toolkit.

Why Everyone’s Talking About It Right Now

We’ve noticed three main reasons that people are drawn to private credit:

The yields are hard to ignore. While savings accounts are paying next to nothing and government bonds aren’t much better, private credit can offer significantly higher interest rates. It’s not unusual to see returns that make traditional fixed-income investments look pretty underwhelming.

It doesn’t dance to the stock market’s tune. When the S&P 500 has a bad day, your private credit investments typically keep humming along unaffected. For portfolios that have gotten too stock-heavy over the years, this diversification can be a breath of fresh air.

Flexibility rules everything. Private lenders can say yes to deals that would make a bank compliance officer break out in hives. Need an unconventional repayment schedule? Want to structure the loan around your cash flow cycles? Private credit can make it happen.

Your Roadmap to Getting Started

Based on our experience navigating private equity investment opportunities, here are the three most practical ways to dip your toe in these waters:

Starting with a private credit fund often makes the most sense. This is where professional fund managers handle the complexities – they identify promising projects, negotiate favorable terms, and manage ongoing relationships. Your investment flows into carefully selected opportunities while experienced teams handle the day-to-day management. It’s like having seasoned professionals working to deploy capital into well-vetted projects on your behalf.

Consider co-investing opportunities. Some private equity investment firms let you tag along on specific deals. Instead of investing in their general fund, you can participate directly in particular projects that catch your eye. We’ve seen investors really connect with this approach because they can see exactly where their money is going.

Direct lending (for the adventurous). This one’s typically reserved for investors with serious capital and experience. You’re essentially becoming the bank yourself, lending directly to companies or projects. It’s not for beginners, but the potential returns reflect the additional complexity.

Where Do You Go From Here?

Private credit isn’t a magic solution, and it’s definitely not right for every investor. But if you’re tired of rock-bottom interest rates and want to add something different to your portfolio, it deserves serious consideration.

At Arbour Investments, we’ve built our reputation on identifying private equity investment opportunities and private credit deals that actually make sense. We invest in carefully vetted projects rather than throwing opportunities at the wall to see what sticks. Our approach centers on understanding goals, risk tolerance, and timelines to ensure alignment with each investment opportunity.

If you’re curious about how to invest in private credit but don’t know where to start, that’s exactly the kind of conversation we love having. Let’s talk about whether this fits into your bigger financial picture, and if it does, how to do it the right way.