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What is a Private Business Loan?

A private business loan is any type of business financing provided by a non-bank business lender. Unlike with an equity investor like angel investors and venture capital, a private business loan doesn’t require giving away a portion of your company’s equity in order to obtain financing. Private business loans are almost always structured as a type of debt financing, that are structured as loans, lines of credit, factoring and sales of future business receivables.

What is the Purpose of Private Business Lending?

Private small business lending is meant to fill the gap left by traditional and conventional bank lending institutions. Oftentimes, conventional lenders have very strict lending criteria with little to no flexibility in their underwriting and structure of the business loan facility. Private lenders on the other hand aren’t constrained by many of the regulations and restrictions that FDIC-insured lending institutions have. With these looser regulations and fewer restrictions, private lenders are able to offer small businesses with creative types of business financing that can work for nearly any business that can prove their ability to repay the loan, and doesn’t pose too much risk to the lender or funding company.

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