Gareth Henry, a US-based investment professional, claims that the private credit sector has become a significant part of the world’s investment industry. According to the professional, many optimistic entrepreneurs regard private creditors as an excellent alternative to conventional banks.
Why is the private credit sector becoming popular?
According to Gareth Henry, the private credit sector started increasing after 2008’s financial crisis. At that time, many banks implemented austere financial regulations that made it hard for growing companies to secure loans.
Those growing companies who could not access bank loans moved away to the private creditors with relaxed financial regulations.
Apart from the strict financial regulations, many companies prefer private creditors to banks since they wouldn’t want the issues associated with being a public company. As a rule, public companies are required to disclose their accounting reports after a certain period. Discrepancies in those reports can hurt the company’s reputation and productivity.
Besides hurting the company’s reputation, prospect partners and investors may be discouraged from capitalizing in companies with slow growth. On that account, many growing companies prefer to maintain their private status to being public.
Are private creditors safe?
While private creditors play a significant role in the investment industry, Gareth Henry says that they have their share of setbacks. For instance, some less reputable private creditors have hidden charges that can rip-off unsuspecting entrepreneurs. On that account, it is always important for an entrepreneur to review any financial deal that comes on their way keenly.
Unlike banks, Gareth Henry says that different states have varying financial regulations that govern the private creditors who operate within the state’s boundaries.
Some of the laws tend to favor the creditor more than the borrower. Therefore, Henry calls for his clients to gauge how a state’s laws can protect or hurt them just in case a financial deal gets sour.
Who is Gareth Henry?
Henry is a trained actuary with first-hand information in private credit and equity deals. He has worked as a senior investment expert in Angelo Gordon, Fortress Investments, and other principal investment management firms.