Short answer: Private credit can work after a bank rejection only when the problem is the bank’s mandate, collateral policy or required structure, not the company’s inability to repay. An Indian borrower should first size sustainable debt capacity, then approach funds whose strategy matches the use of proceeds, security package, risk and required timeline.

A bank’s “no” can feel like the end of a financing process. Often it is simply the end of one lender’s process. Banks and private credit funds do not have identical mandates, capital costs, security requirements or approval criteria. A fund may consider an acquisition, refinancing, holding-company facility or complex collateral package that does not fit a bank’s policy.

That does not make private credit an escape from underwriting. The fund will rebuild the credit case, test downside cash flow, negotiate protections and price for risks the bank would not accept. The borrower’s job is to show that the company is financeable on a different structure, not to hide why the bank declined.

India’s private-credit market is deep enough to offer various options. EY tracked US$3.5 billion across 102 Indian private-credit transactions above US$10 million in the first half of 2026, with domestic providers representing 74% of tracked deal value. The dataset excludes smaller deals, venture-debt-only transactions, NBFC-only transactions, foreign-bank deals and offshore raises, so it is not the whole market. Refinancing, project funding, holding-company funding and acquisition financing were prominent uses. See EY’s H1 2026 India private-credit report.

Start by diagnosing the bank’s no

Ask the bank for a specific explanation. “Outside policy” and “insufficient repayment capacity” are very different answers. A private-credit process is worth considering only when you understand which one you received.

What the bank says What may sit behind it What it means for private credit
The purpose or structure is outside policy Acquisition financing, HoldCo debt, promoter-related funding, a bridge, unusual cash flows or another non-standard use A fund with the right mandate may consider it, but will still require a defined repayment or refinancing path
Collateral is insufficient or difficult to value The bank relies on a security type or coverage level the company cannot provide An asset-backed or cash-flow lender may underwrite differently, usually with its own valuation, controls and recovery analysis
Leverage or coverage is too weak Existing debt, volatile EBITDA, low free cash flow or an aggressive requested amount The answer may be a smaller facility, more equity, a different repayment schedule or no additional debt
The sector, group or exposure is restricted Internal concentration limits, regulatory constraints or portfolio appetite A specialist fund may have room, provided the underlying business and repayment case remain sound
Information or compliance is not satisfactory Late accounts, unexplained related-party flows, tax or legal issues, weak controls or inconsistent forecasts Fix the issue first. A private lender is likely to investigate it more closely, not ignore it
The bank cannot meet the required timetable Internal approval, valuation, documentation or syndication will take longer than the transaction allows A concentrated lender group can sometimes decide more directly, but diligence, investment committee approval and documentation still take time

Do not turn the bank’s feedback into a sales pitch. Put it in the lender pack with management’s response. If leverage is high, show the deleveraging path. If collateral is already charged, map every existing lien. If a forecast moved, bridge the old case to the new one. A fund will usually discover the issue during diligence, and late discovery damages confidence.

When private credit fits, and when it does not

Private credit is most credible when five things are visible: a specific use of funds, a financeable business, a measurable repayment source, a structure the fund is permitted and willing to provide, and enough downside protection for the risk.

Common uses include refinancing a maturity, funding a defined acquisition, financing capital expenditure, bridging to a contracted inflow, supporting working capital linked to an identifiable operating cycle, or funding a group-level transaction that ordinary operating-company debt cannot address cleanly. The use should have an amount, draw date, cash effect and exit from the debt.

It is a weaker fit when the company needs debt to fund recurring losses with no credible route to cash generation, when the requested amount depends on an unsupported forecast, or when repayment assumes a future equity round or asset sale that may not happen. More flexible documentation does not turn a permanent capital need into a temporary one.

Special-situations and stressed-credit funds may consider cases that performing-credit funds will not. That is a different process. The provider may underwrite primarily to collateral, control, restructuring or recovery rather than normal operating cash flow. Management should not approach a special-situations solution as though it were simply a higher-priced term loan.

Size debt capacity before you contact funds

The amount the company wants is not the amount it can safely borrow. Start with Alehar’s Debt Capacity Calculator to form an initial view in Indian rupees, then build the transaction model around the actual instrument.

The model should start with existing debt and the cash available for all debt service. Reconcile reported EBITDA to a lender-style base case. Remove one-off gains, challenge add-backs and show maintenance capital expenditure, tax, leases, working-capital movements and other fixed claims. A fund may use its own definitions, so management’s adjusted EBITDA is a proposal, not a fact.

Run at least a supported base case and a downside case. The downside should reflect the company’s real risks, such as slower collections, raw-material inflation, customer loss, delayed capacity ramp-up, lower occupancy or an acquisition taking longer to integrate. Show the lowest cash balance, interest and principal due, covenant headroom, security coverage and balance at maturity.

Then test the exit from the debt:

  • Can operating cash flow amortize the facility?
  • If principal is due at maturity, what evidence supports refinancing capacity then?
  • If repayment depends on an asset sale, who controls timing and what happens if value or timing disappoints?
  • If equity is part of the plan, is it committed or merely expected?
  • Does the proposed debt leave enough liquidity for the business to execute the plan?

A smaller first draw with later draw conditions can be safer than taking the full amount on day one. It can also create execution risk if the provider may decline the later draw. Model both the cash benefit and the conditionality.

Match the lender’s mandate to the borrower’s situation

“Private credit fund” is not one lender type. Funds differ by return target, sector, ticket, security position, fund life, concentration limits and tolerance for complexity. A good company sent to the wrong mandate still receives a no.

Mandate Typical borrower situation What to establish early
Performing corporate credit Established EBITDA and a defined refinancing, capex or growth requirement Leverage tolerance, amortization, covenant framework, security and sector appetite
Asset-backed or project credit Repayment and recovery supported by receivables, inventory, equipment, real estate or project cash flows Eligible assets, valuation method, advance rate, escrow or account control and existing charges
Acquisition or HoldCo credit Funding a purchase, promoter stake transaction or group-level need above operating subsidiaries Structural subordination, upstream cash access, pledge package, acquisition approvals and equity contribution
Venture debt Venture-backed company with a specific milestone and credible next financing or cash-generation path Investor support, minimum cash, warrants or other upside, draw conditions and next-round dependency
Special situations Refinancing pressure, complex legacy liabilities, distress or a transaction driven by recovery value Control rights, security enforcement, restructuring plan, stakeholder consent and the real cost of time

Before sharing detailed information, ask who will legally provide the capital. Identify the manager, fund or scheme, lending or subscribing entity, investment committee, expected hold period and any co-investor or syndication requirement. Ask whether the provider has capital available for the full facility, whether it can fund follow-on needs, and whether its own fund maturity conflicts with the proposed loan maturity.

Also ask about transfer rights. A borrower may build a relationship with one fund team and later find the debt transferred to another holder. The documents, not the pitch meeting, determine whether and how that can happen.

Build a credit case a fund can take to investment committee

The first document should be a financing brief, not a large data dump. A decision-ready brief lets a lender decide whether the opportunity fits before both sides spend weeks on diligence.

What the financing brief should contain

  • Borrower, group structure, ownership and the entity that will receive funds
  • Exact amount, currency, draw schedule and use of proceeds
  • Preferred maturity and repayment profile, with the commercial reason for each
  • Three years of historical performance where available, current year-to-date results and a bridge to the forecast
  • Existing debt, security, guarantees, maturity dates, covenants and any current or expected breach
  • Proposed security and the status of existing charges
  • Base and downside debt-service capacity
  • Primary repayment source and a credible secondary route
  • Required timing and the event that makes it important
  • Known issues, management’s response and the evidence available

The brief should answer the question the lender’s team must take to investment committee: why can this borrower repay this instrument, and what protects the fund if the plan underperforms?

Prepare the model and data room before outreach

A fund may request audited financial statements, current management accounts, bank and tax information, debt and contingent-liability schedules, customer and supplier concentration, working-capital detail, projections, group-company flows, litigation, regulatory matters, corporate records and collateral evidence. The exact list depends on the borrower and structure.

Organize the data room by workstream and reconcile every number used in the financing brief to a source file. Keep one question log, one document index and one approved version of the model. If two lenders receive different EBITDA, debt or cash numbers without explanation, the process will lose credibility.

Do not hide bad news in a folder. Surface covenant pressure, delayed receivables, customer loss, promoter transactions, disputed tax, litigation or title gaps with context and a remedy. The lender is underwriting management as well as cash flow.

Run a controlled process from outreach to disbursement

  1. Approve the financing perimeter. Management and the board should agree the maximum debt, acceptable security, promoter support, restricted actions, target maturity and walk-away terms before the market process begins.
  2. Build a targeted lender list. Select providers by mandate and likely fit. Broad, uncontrolled circulation can create confidentiality problems without improving competition.
  3. Share a short teaser, then use an NDA. Release the financing brief and data room only after confirming initial fit and confidentiality.
  4. Hold management discussions around the credit case. Explain historical performance, downside protection, use of proceeds and repayment. Keep answers consistent and log follow-ups.
  5. Request comparable indicative terms. Give each provider the same ask and a common term sheet template. Separate non-binding indications from terms that the provider is ready to seek approval for.
  6. Select a lead proposal with conditions visible. A headline amount is not committed capital. Record investment-committee status, diligence scope, conditions, exclusivity, fees and the expected legal provider.
  7. Run diligence and documentation together. Financial, tax, legal, commercial and collateral work can change terms. Bring Indian counsel in early enough to shape the instrument, approvals and security package.
  8. Close conditions before relying on the money. Corporate approvals, existing-lender consents, security creation, account arrangements, filings, documents and funds flow must align before disbursement.

Exclusivity can be reasonable after a provider has demonstrated mandate fit and a credible approval path. It is expensive when granted too early. Define its length, lender deliverables, information obligations, fee treatment and the events that let the borrower exit.

Compare the whole term sheet, not just the rate

Private-credit economics are designed around the fund’s required return, but the borrower should model actual cash flows and operating constraints. An investor return target reported in a market survey is not the same as the borrower’s coupon. Fees, payment timing, redemption amounts, security and equity-linked rights can make them very different.

Term Borrower question
Gross commitment and net proceeds How much usable cash arrives after fees, reserves, deductions and refinanced debt are paid?
Interest and accrual What is paid in cash, what compounds, when does the rate reset and what applies after default?
Fees and redemption amount Which arrangement, diligence, monitoring, trustee, rating, listing, exit, prepayment or break fees apply?
Principal schedule Is the facility amortizing, bullet or partly swept, and does payment match the use of funds?
Draw certainty Which later draws are committed, and which can be stopped by conditions or lender discretion?
Security and guarantees What is pledged, in what ranking, by which entities, and what future financing does it block?
Escrow and cash sweep Which receipts are controlled, how much cash can be retained and when must excess cash repay debt?
Financial covenants How are EBITDA, debt, cash and testing dates defined, and what headroom exists in the downside case?
Consent and control rights Which acquisitions, capex, dividends, new debt, asset sales, related-party payments or management changes need consent?
Default and cure Which events trigger default, what notice and cure periods apply, and when can pricing or repayment accelerate?
Transfer and participation Can the lender transfer the exposure, to whom, and does the borrower have consultation or restriction rights?
Maturity and refinancing What balance remains at maturity, and does the downside case support repayment or refinancing?

Put every proposal into one monthly model using the same operating assumptions. Calculate net proceeds, peak cash debt service, total cash paid, compounded balance, lowest liquidity, covenant headroom and maturity amount. Read Alehar’s guide to debt covenants before accepting definitions that the finance team will have to calculate after closing.

Treat Indian legal and security work as part of the financing design

The label “private credit” does not identify the legal instrument. The provider may be a SEBI-regulated AIF, an NBFC, an offshore credit vehicle or another eligible entity. The borrower may issue non-convertible debentures, enter into a permitted loan or use another structure. The correct route depends on both parties, the use of funds, listing choice, sector, security, residency and transaction facts.

SEBI’s Alternative Investment Funds Regulations and 2026 AIF Master Circular form part of the current framework for Indian AIFs. They regulate the fund, but do not replace the borrower’s corporate and instrument-specific requirements.

For Indian companies, the Companies Act, 2013 includes the framework for private placements, debentures and registration of charges. If non-convertible securities are proposed to be listed, the SEBI non-convertible securities regulations and current operational requirements also matter.

Build a closing checklist with qualified Indian advisers. Depending on the transaction, it may cover board and shareholder approvals, borrowing limits, private-placement steps, offer and allotment records, a debenture trustee, rating and listing work, stamp duty, creation and perfection of charges, Registrar of Companies filings, mortgage or pledge formalities, account control, guarantees, existing-lender consents and intercreditor arrangements. Offshore capital can introduce foreign-exchange and external-borrowing requirements. Do not agree the commercial structure first and ask whether it is executable later.

Red flags in a private-credit process

  • The provider will not identify the legal funding entity, fund or scheme.
  • The proposal is described as committed before investment-committee approval and diligence conditions are clear.
  • The headline rate is emphasized while net proceeds, fees, redemption amount or compounding are left undefined.
  • A large non-refundable fee or long exclusivity period is requested without specific lender deliverables.
  • The proposed security ignores existing charges, consents or release mechanics.
  • The repayment case works only in management’s upside forecast.
  • The fund’s remaining life, transfer rights or follow-on capacity conflict with the borrower’s needs.
  • An arranger cannot explain its mandate, economics, authority or relationship with the proposed provider.
  • Documents introduce control, default or enforcement rights that were absent from the commercial discussion.

A credible process makes these points explicit. It does not rely on speed claims or the idea that private lenders ask fewer questions than banks.

Borrower readiness checklist

  • Written explanation of why the bank declined or could not proceed
  • Board-approved maximum debt and acceptable security perimeter
  • Debt-capacity model with base and borrower-specific downside cases
  • Exact sources and uses, draw timing and repayment route
  • Complete existing-debt, charge, guarantee and covenant schedule
  • Reconciled historical accounts, current management information and forecast
  • Short financing brief tailored to a lender investment committee
  • Indexed data room and one controlled question log
  • Target list organized by mandate, not brand recognition
  • Common term sheet and monthly comparison model
  • Indian legal, tax and accounting advisers engaged for the proposed route
  • Clear walk-away points for cost, control, security and maturity risk

Your next step after the bank says no

Do not start by circulating a teaser to every fund you can find. Start by establishing the amount the company can support. Use Alehar’s Debt Capacity Calculator, select India and compare the result with the current debt schedule, downside cash flow and proposed use of funds.

If the company has financeable capacity but needs a non-standard route, Alehar’s Raising Equity or Debt team can help prepare the credit case, identify suitable providers, compare proposals and run the process alongside the company’s advisers. Contact us to discuss the situation.

Sources checked