Guide on direct lending: what it is, what it is for and how it can help your company

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Do you need liquidity for your business, and thus be able to face forced investments in the short term? The number of loans granted by banks has suffered a small paralysis, with the consequent negative effect that this may have on SMEs in our country. Therefore, in this article we will talk in detail about a possible alternative financing formula, he direct lending.

What is direct lending and what is it for?

He direct lending is constituted as a alternative financing tool for the companies. Through direct lending, companies obtain financing, but this does not come from financial institutions, as can be the case with the granting of credits by this type of entity. In this case, they are private investors (for example, investment funds), which they provide liquidity to business.

These private investors have a clear objective when undertaking this type of operation, that of obtain profitability with these actions. This profitability is obtained from two ways:

  • interest rates, which are frequently high (around 8%).
  • In addition to this fixed part, the contracts between the parties involved usually include a variable component, which is usually linked to macroeconomic variables or preferential access to shares or shares of the companies to which they provide liquidity.

Regarding this variable component, it is recommended that interested companies be clear about the contract conditions that is going to be signed with the investors, and in this way know the requirements of the financing packages to which they will have access.

As for the direct lending in Spain, it is worth noting the existing flexibility enjoyed by the entities involved in this financial modality, since there are no limitations of any kind for this activity. He direct lending in our country is not under the supervision of official bodies, such as the Bank of Spain

Between the fmost important direct lending investment funds in Spain, the following should be highlighted:

  • tressis, in operation since 2014. It focuses its investments on medium-sized companies, which usually present a high risk.
  • Alantra Private Debt, also created in 2014. This investment fund already has around 300 million euros under management, with expectations of increasing this amount in the near future.

How can direct lending help your company?

Thanks to direct lending, companies that for various reasons have Difficulties in accessing traditional sources of financing or related to banks, can adhere to this type of alternative financing source. In this way, organizations can continue to cover their capital needs in the short term.

Another of the benefits that your company can get from taking advantage of this financial tool is that the repayment terms of the loans granted it is usually higher than in the case of loans granted by banks. Furthermore, amortization is in the form bullet, that is, the entire loan is repaid on the same day it expires.

As a last advantage, and derived from an aspect mentioned above (absence of supervision by official bodies), is the easier and faster to carry out all this financial operation. This is possible thanks to the fact that direct lending is not included in banking regulations, which are increasingly restrictive).

Possible disadvantages

Among the possible disadvantages of direct lending, there are the following:

  • Frequently, private investors request to have a position in functions that affect the decision making of the company with which they operate (the borrower).
  • As already mentioned above, the interest rates required by lenders are usually high, around 8%, but in any case higher than the rates associated with bank financing.
  • In some situations, investors will conduct an audit of the company requesting capital.


There are various forms of financing, which are very valid alternatives to conventional or traditional modalities, such as bank loans. Through the elaboration of this article, we wanted to highlight one of the possibilities available to you, the direct lending. If you still have doubts, at Alter Finance, as experts in business financing and collection management, we trust that we can resolve them. Contact us whenever you need it.

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