Bank Turndowns
A bank turndown doesn't mean your deal is unfinanceable. It means your deal doesn't fit the bank's regulatory box. Private credit lenders operate outside that box — they underwrite what banks can't, close faster, and build their business on the deals banks decline.
The alternative lending universe
Why banks pass
Banks have fixed origination and underwriting costs. A $5M loan requires nearly the same paperwork as a $50M loan — the smaller deal generates less net interest income and fails the return-on-effort test.
Private credit view
Direct lenders and lower-middle-market funds build their entire business on $2M–$25M checks. They've optimized for smaller deal economics. A deal that's 'too small' for a bank is right-sized for hundreds of private credit funds.
Why banks pass
Regulatory capital requirements limit how much leverage banks can underwrite. Post-2008, banks face hard caps on leverage ratios. A 4x debt-to-EBITDA deal may exceed what a regulated bank can hold.
Private credit view
Private credit funds aren't regulated banks — they can underwrite 4x, 5x, even 6x leverage if the cash flows support it. Unitranche and mezzanine lenders specifically target leveraged situations banks can't touch.
Why banks pass
Banks maintain industry concentration limits and 'restricted' lists. Cannabis, crypto, gaming, and sometimes even SaaS (no hard assets) get flagged. A bank's credit policy is set at the top and applied uniformly.
Private credit view
Specialist private credit funds build their entire mandate around specific industries. There are funds that only do healthcare, only do software, only do energy. Instead of avoiding 'weird' industries, they develop expertise in them.
Why banks pass
Bank credit committees meet on a schedule — weekly or bi-weekly. Due diligence, appraisal, legal review, and committee prep can easily push closing to 60–90 days even on a clean deal.
Private credit view
Direct lenders with investment-team authority can issue term sheets in 48 hours and close in 2–4 weeks. No committee calendar, no multi-layer approval chain. When a deal is time-sensitive, speed alone can be worth the rate premium.
Why banks pass
Banks lend against hard assets: real estate, equipment, inventory, receivables. A software company or service business with $20M in ARR but no physical collateral fails the asset test regardless of cash flow.
Private credit view
Cash-flow lenders underwrite the recurring revenue, contract backlog, or EBITDA stream — not the liquidation value of desks and servers. Enterprise SaaS companies routinely raise debt at 3-6x ARR from private credit funds with zero hard collateral.
Why banks pass
Banks want 3+ years of profitable operating history. A company growing 100% year-over-year but only 18 months old fails the track-record requirement.
Private credit view
Venture debt and growth-stage lenders underwrite trajectory, not history. They look at total equity raised, investor quality, revenue growth rate, and unit economics. A Series B company with strong metrics can raise debt even if it's unprofitable.
The cost of a bank turndown
Private credit costs more than bank debt — typically 2–5 percentage points in spread. But the real cost isn't the rate: it's the deal that doesn't happen, the acquisition you lose to a competitor who closed faster, or the growth you defer while waiting for a bank committee. Speed and certainty have their own ROI.
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