Most companies treat the choice between bank and private funding as binary. In practice, it rarely is. The question isn’t which one is better, it’s understanding how each works, where each fits, and how to use them together.
A bank will usually look first at collateral, leverage, debt service capacity, covenant headroom, sector limits, and whether the transaction fits a standard internal credit framework.
More specifically, a bank will assess:
🔹 Collateral: do you have hard assets to back the loan?
🔹 Debt service capacity: can you cover repayments comfortably?
🔹 Covenant headroom
🔹 Leverage
🔹 Whether the transaction fits a standard internal credit framework
The process is structured, model-based, and approval is committee-driven. The advantage is clear: lower pricing. The constraint is just as clear: less room for flexibility.
A private lender approaches the same file differently. The discussion is usually more direct and more focused on the overall transaction logic:
🔹 Cash flow visibility: are revenues predictable enough to structure around?
🔹 Quality of the asset or business
🔹 Execution risk
🔹 Leverage tolerance
Private lenders look into how the financing can be structured around the borrower’s actual needs. That can mean bullet repayment, unitranche, PIK features (payment of interest postponed to maturity), deferred mechanisms, or other tailored solutions. Their approach is more tailored and often faster to execute, but that flexibility comes at a higher cost.
The difference between bank and private lending is not theoretical. It shows up very concretely in:
🔹 The speed of execution
🔹 The room for structuring
🔹 The type of collateral expected
🔹 The acceptable leverage
🔹 The repayment profile
🔹 The type of borrower each lender is willing to support
Banks are often the natural fit for asset-heavy, more standard, and lower-risk situations. Private lenders are often the better fit for more complex, asset-light, acquisition-driven, or cross-border situations, including refinancing challenges or a need for bespoke structuring.
In Belgium, bank debt still dominates corporate financing. Yet many SMEs still struggle to secure the funding they seek. That gap is one of the reasons why private debt is becoming a more relevant part of the financing toolkit.
In many Belgian mid-market deals, the best answer is not choosing one against the other. It is using each for what it does best.
What we see more and more in practice: not a choice between the two, but a combination:
🔹 A bank tranche for lower-cost senior financing
🔹 Private credit for additional flexibility where bank appetite stops
The real value lies in knowing where each fits, and how to structure them together in a coherent way.
At Ernest Partners, we help companies identify the right financing mix and structure solutions that are both credible for lenders and aligned with the reality of the business.
Curious to see which combination fits your needs best? Get in touch via info@ernestpartners.eu
