Direct lending

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Direct loans are a form of debt provision in which a lender other than a bank lends to a company without an intermediary such as an investment bank, broker or private equity firm. In direct borrowing, borrowers are usually small or medium-sized companies, also called small and medium businesses, rather than large listed companies, and lenders may be rich or asset management companies.

Peer-to-peer lending networks such as crowdfunding are sometimes considered part of the direct lending market and lend to very small companies. However, most asset managers involved in direct loans will consider loans just above a certain size, usually EUR5 million or more. Apart from peer-to-peer networks, direct loans are therefore primarily focused on medium-market borrowers.

The market has become increasingly important since around 2009 in response to banks that reduce their lending activities to companies amid the 2007-08 financial crisis. There is little comprehensive data on market size and the scale of debated opportunities. The need for direct loans has been charged to EUR100 billion in Europe alone between 2013 and 2015. However, other sources report that by 2014 asset managers are struggling to find enough direct loan opportunities to invest.

The asset manager cites higher profits available from direct lending strategies as the main reason that people should invest in direct loans. The US pension fund is one of the investors that has reportedly made an allocation to direct its lending strategy, especially in Europe. Some European governments have taken the initiative to increase lending directly to small companies since the financial crisis. For example, in 2012 the British government introduced a scheme to lend  £ 700 million of public money to small companies in partnership with asset managers. A large number of asset management companies have started funding to invest in direct loans, and some US companies have been targeting European direct loans since around early 2013.

Video Direct lending

List of direct lending managers

The asset managers involved in direct loans include:

Maps Direct lending

See also

• Crowdfunding
• Business capital
• Angel Investors
• Income-based financing
• The history of private equity and venture capital

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References

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External links

• Direct Loan Loans - What Are Secondary Market Needs Found?

Source of the article : Wikipedia