What is a direct loan and why is it important?

The term direct loan is not particularly well known in the Nordic market, but even more so in the European and American markets. The meaning is relatively simple; direct loan is just like a regular bank loan, but without a bank. The lender is instead a private actor, for example a fund, and thus direct loans as an asset type are usually called "private debt". Direct loans as financing have grown as an asset class ever since the financial crisis. As tougher regulations have been introduced, banks have become increasingly restrictive in their lending to companies, which has paved the way for alternative financing, including direct loans. Above all, banks have become more restrictive in lending to small and medium-sized companies, where direct loans as financing fill a hole in the market.

Direct loans create lots of opportunities
As a company in need of financing, direct loans may be the only option for financing. Banks are governed by stricter regulations that private actors on the loan market are not affected by, and therefore enable the financing of small and medium-sized companies, a segment of companies that without direct loans would not have access to debt capital at all. In other cases, companies have the option of bank financing, but choose direct loans to be able to borrow at a higher loan-to-value ratio. Actors in the direct loan market can take on more risk than banks can, quite simply. Another situation where direct loans are a solution is for family-owned businesses in need of capital that cannot access bank financing. In family-owned companies, you don't want to be diluted in your ownership and therefore don't want to take in more equity. The direct loan market can then offer debt capital. In other words, direct loans as financing can be decisive for a company's ability to expand or implement changes.

Through the fund Scandinavian Credit Fund I, the credit fund offers direct loans to small and medium-sized companies.

Through more than 5,500 private investors, the fund has built up capital that is invested in direct loans to Nordic companies or companies with connections to the Nordics. The direct loans are short-term and the structure of the loans can be varied and flexible depending on the borrower, another advantage of direct loans. While the Fund contributes to the development and growth of companies through financing, the Fund offers investors an investment product that is not normally available to private investors.