Navigating private credit: Funds, terms, and execution

Part 2 focuses on execution: how to approach lenders without wasting time, which funds to target based on your stage and needs, how deals get structured, what terms to negotiate, and where founders typically lose control.

This is the tactical playbook for founders who’ve decided private credit is right for them.

How to approach private credit funds

This is not a pitch deck exercise. It’s closer to writing an IC memo for someone else’s investment committee.

Step 1: Be precise about the ask

Funds dislike vague capital needs. You need four things defined:

• Exact amount (±10%, not ±50%)
• Specific use of funds (not “growth and working capital”)
• Clear repayment source (contracted revenue, existing cash flows, defined exit event)
• Realistic timeline (when does the loan get paid back?)

Ambiguity raises pricing or kills the deal.

Step 2: Build your credit story

Your narrative should answer one question: Why is this loan safe, even if growth slows?

That means:

• Conservative cash-flow projections with sensitivity analysis (show what happens at -20% and -30% revenue)
• Clear ranking of lenders in the capital stack (who gets paid first if things go wrong?)
• Downside scenarios that still show coverage (not just base case and upside)

Over-optimism is a warning signal to credit investors. Err toward realism.

Credit story template:

• Current business: Rs X revenue, Rs Y EBITDA, Z% margins
• Use of funds: Specific deployment ( capex, bridge round)
• Repayment source: Rs A annual cash flow, Rs B coverage ratio
• Downside case: Even at -25% revenue, we generate ₹C cash flow, covering debt service of Rs D
• Security offered: Shares/assets worth Rs E at current valuation

Step 3: Approach the right fund

Not all private credit is the same. Funds differ sharply by cheque size, risk appetite, and structure.

How to find the right fund:

• Ask your PE or VC investors for intros (warm intros convert 10x better)
• Work with boutique investment banks that specialise in credit placement
• Use legal advisors familiar with AIF credit structures (they know who’s actively deploying)

Cold outreach can sometimes work, but is less effective. Private credit is a relationship-driven market.

The fund landscape in India

The landscape splits along two dimensions: cheque size and stage accessibility.

Early-stage focused (Rs 50 lakh–10 crore cheques)

Revenue-based financing platforms: GetVantage, Velocity. These platforms fund businesses with a monthly revenue of Rs 30 lakh+. Repayment is a fixed percentage of monthly revenue (typically 10–15%) until a total amount (120–150% of principal) is repaid. Fast deployment (2–4 weeks), minimal dilution, but expensive effective interest (17–24% annualised).

Venture debt specialists: Trifecta Capital, Alteria Capital, InnoVen Capital. Typical cheque sizes: Rs 3– 10 and go up to Rs 50 crore. Usually deployed within 2-6 months of an equity round, sized at 20–35% of the equity raise. Requires strong equity investor backing. Interest rates: 12–15% plus warrants (1–3% equity).

Key difference: Venture debt is not pure cash flow lending. It’s a bet on your equity investors’ judgment and your ability to raise the next round. Revenue-based financing is pure cash flow underwriting.

Mid-market and growth-stage (Rs 10–200 crore cheques)

Founder-focused platforms (Rs 10–75 crore cheques): RevX Capital (Rs 1,500–2000 crore AUM). Focus on non-dilutive capital for professionally managed businesses irrespective of cap tables. Manages two credit strategies: Performing Credit for deployment in working capital and capex, and Special Credit Opportunities Fund for selective acquisitions, bridge financing and even turnaround cases. Faster and more flexible, but they compensate with tighter monitoring and downside protection.

Mid-market credit specialists (Rs 25–100 crore cheques): Vivriti Asset Management (Rs 10,000+ crore AUM), Neo Asset Management (targeting Rs 3,000–3,500 crore for Special Credit Opportunities Fund II). More flexible than banks, but still expect institutional reporting and control protections. Focus on structured, acquisition, and pre-IPO credit.

Mainstream asset managers (Rs 50–200 crore cheques): Kotak Credit Opportunities Fund (Rs 1,200+ crore raised), Axis Asset Management (targeting ~Rs 2,000 crore). Secured, cash-flow-backed lending. Closest to banks in discipline and documentation requirements. Best for stable EBITDA companies with clean governance.

Large institutional (Rs 100–500+ crore cheques)

Large structured credit platforms: Avendus Capital (raising ~Rs 5,000 crore) and Edelweiss Alternative Asset Advisors (Rs 40,000+ crore AUM). These funds handle large acquisitions, pre-IPO bridges, or refinancing. Not accessible for early or mid-stage founders.

Global private credit firms: Varde Partners, Ares, Blackstone, Lighthouse Canton. Active in India through offshore vehicles ($500 million–$1 billion funds). Selective, large, late-stage deals only. Largely inaccessible to smaller founders.

Decision guide by stage and need

Pre-Series A / Seed stage:

• Need < Rs 5 crore, have consistent revenue → Revenue-based financing (GetVantage, Klub)
• Just raised equity, need runway extension → Venture debt (Trifecta, Alteria, InnoVen)
• Pre-revenue or erratic cash flows → Focus on equity, debt won’t work

Series A – Series B stage:

• Need Rs 5-75 crore, revenue-generating → Founder-focused platforms (RevX) or venture debt
• Need Rs 20–100 crore, stable unit economics → Mid-market specialists (Vivriti, Neo)
• Need growth capital without a specific use → Equity is better

Series C+ / Pre-IPO stage:

• Need Rs 50–150 crore, stable EBITDA → Asset managers (Kotak, Axis) or mid-market specialists
• Need > Rs 150 crore, pre-IPO or acquisition → Large structured credit platforms (Avendus, Edelweiss)
• Complex situations (refinancing, special situations) → Edelweiss, global firms

@media (max-width: 769px) {
.thumbnailWrapper{
width:6.62rem !important;
}
.alsoReadTitleImage{
min-width: 81px !important;
min-height: 81px !important;
}

.alsoReadMainTitleText{
font-size: 14px !important;
line-height: 20px !important;
}

.alsoReadHeadText{
font-size: 24px !important;
line-height: 20px !important;
}
}

Also Read

Understanding private credit for startups: When and how to use it

How deals get structured (And where founders get hurt)

Early-stage debt (Venture Debt, Revenue-Based Financing)

Venture debt:

• Interest rates: 12–16% per annum
• Warrants: 1–3% equity kicker
• Tenure: 24–30 months (12–18 months interest-only period, then principal repayment)
• Security: Typically, second-ranking charge on assets, sometimes cash flow escrow
• Covenants: Light—usually just minimum cash requirements and equity raise triggers

Revenue-based financing:

• Repayment structure: Fixed % of monthly revenue (10–15%) until 120–150% of principal repaid
• Effective cost: 17–24% annualised (depends on how fast you grow)
• Tenure: Repay as you earn (typically clears in 12–24 months)
• Security: Often unsecured or light charges
• Covenants: Revenue floors, sometimes growth rate requirements

Growth-stage debt (Traditional private credit)

• Interest rates: 14–20% IRR (sometimes higher for riskier deals)
• Structure: Floating rates tied to benchmarks, quarterly or monthly interest payments
• Covenants: Restrictions on leverage, minimum cash balances, EBITDA thresholds, and change of control
• Security: Pledge of shares, asset mortgages, or escrow arrangements
• Warrants: Sometimes included (5–10% equity kicker on exit)

Common founder mistakes

For early-stage:

Treating venture debt like free money. Venture debt only works if your next equity round closes. If it doesn’t, you’re forced into emergency fundraising with a ticking clock—usually resulting in worse terms or loss of control.

Underestimating revenue-based financing costs. A 12% revenue share that clears at 140% payback seems reasonable until your revenue plateaus. Suddenly, you’re paying off debt for over 30 months at effective rates over 20%.

Not having a backup plan. If you’re taking venture debt to extend your runway, you need clarity on what happens if the round doesn’t come through. Most founders don’t have this answer.

For growth-stage:

Ignoring control covenants. Breaching a debt-to-EBITDA ratio or minimum cash covenant can trigger technical default, giving lenders board seats or veto rights—even if you’re current on interest payments.

Underestimating default triggers. Defaults aren’t just about missing payments. They include covenant breaches, material adverse changes, cross-defaults with other lenders, and unauthorised asset sales. Read every trigger carefully.

Not stress-testing repayment. Running projections that assume everything goes right is dangerous. Model what happens if your largest customer churns, a product launch delays, or a key hire falls through.

Assuming renegotiation will be easy. It won’t be. Funds build their terms assuming you’ll breach.

Renegotiation typically means: new equity investors stepping in, personal guarantees getting called, or board control shifting. By the time you need flexibility, your leverage is gone.

Private credit is forgiving upfront and ruthless if things break.

What to negotiate (And what not to waste time on)

For early-stage (Venture Debt, Revenue-Based Financing)

Worth negotiating:

• Warrant coverage: Push for 1–1.5% equity vs 2–3%. Every point matters.
• Revenue share percentage: In revenue-based financing, getting 10% instead of 15% dramatically changes your payback period.
• Cap on total repayment: Negotiate 125–130% instead of 140–150% multiples.
• Equity round triggers: In venture debt, negotiate a longer runway (18–24 months) before you’re required to raise your next round.

Hard to negotiate:

• Interest rates (fairly standardised by risk profile)
• Basic reporting requirements
• Security requirements

For growth-stage (Traditional private credit)

Worth negotiating:

• Prepayment flexibility: Ability to pay down debt early without penalties (or with reasonable penalties)
• Cure periods: Time to fix covenant breaches before default (30–60 days is standard, 90 is better)
• PIK/Redemption premium vs cash interest: Payment-in-kind interest accrues instead of being paid out, preserving cash flow
• Step-down pricing: Lower interest rates if you hit performance milestones (EBITDA targets, revenue thresholds)

Hard to negotiate (don’t waste capital here):

• Security requirements (funds won’t budge on collateral)
• Seniority in the capital stack (they want first claim)
• Information rights (monthly/quarterly reporting is standard)

Universal rule across stages: Focus on flexibility and operational breathing room, not headline rates. A 16% loan with loose covenants may be better than a 14% loan with tight ones.

Timeline: what to expect

For early-stage (Venture Debt, Revenue-Based Financing)

• Weeks 1–2: Application, initial underwriting (revenue verification, basic financials)
• Weeks 2–3: Term sheet, light due diligence
• Week 4: Documentation and drawdown

Total time: 3–5 weeks for clean deals. Revenue-based financing can be faster (2–3 weeks) since underwriting is simpler.

For growth-stage (Traditional Private Credit)

• Weeks 1–2: Initial conversations, term sheet discussions
• Weeks 3–6: Due diligence (financial, legal, operational)
• Weeks 7–8: Final documentation, security creation
• Week 9+: Drawdown

Total time: 8–12 weeks for a clean deal. Add 4–8 weeks if governance or documentation needs cleanup.

What happens in a default

Practically, not theoretically:

Covenant breach (Technical Default)

Lenders can call a review meeting, demand a corrective action plan, impose additional reporting, or adjust terms (higher interest, tighter covenants). This happens before an actual default.

Payment default

Lender accelerates the loan (entire amount becomes due), enforces security (sells pledged shares or assets), takes board seats or control rights, or pursues personal guarantees if provided.

Outcome paths

• Best case: New equity investor steps in, recapitalises the company, pays off debt
• Middle case: Negotiated restructuring (extended tenure, equity conversion, new guarantees)
• Worst case: Lender forces a sale or takes control

The key: default doesn’t mean instant liquidation; most lenders try to support/revive, but it does mean you’ve lost negotiating leverage.

Final take

Private credit is a powerful tool for founders who have cash flows, need speed or structure, and want to avoid dilution.

But it rewards discipline, realism, and preparation—not storytelling.

Used well, it extends your runway and preserves equity. Used poorly, it accelerates a loss of control.

Banks remain cautious. Venture capital is selective. Equity dilution is expensive. Private credit fills the gap, but only for founders who understand that borrowed money comes with borrowed time.

Read Part 1 if you haven’t already; it covers when private credit makes sense, what funds actually underwrite, and real examples of successful and failed debt raises.

This guide is derived from conversations with investors, fund managers, and founders who have raised private credit in India. It reflects market practices as of early 2025.