Bank vs. private credit lender for fund finance, what's the difference?

When bank capacity wins and when private credit becomes the better path

Bank dominance in sub-lines: large global and regional banks dominate the subscription-line market. Pricing is competitive (especially for top-tier LP-base funds) and capacity is deep. Banks have efficient operations for the standard sub-line product, annual renewals, LP-base updates, advance-rate calculations.

Where banks step back: post-2023 banking-stress period, some regional banks reduced sub-line capacity. Some banks pulled back on NAV facilities, GP-credit, and complex situations. Concentration limits at individual banks have tightened. Funds with unusual LP composition (heavy non-OECD, heavy retail HNWI, single-LP funds) face thinner bank appetite.

Private credit growth: specialty credit funds, BDCs, and direct lending platforms have grown to fill the gap. Pricing is wider than bank sub-line execution but private credit accepts NAV facilities, GP-credit, single-LP funds, and sub-line-on-sub-line structures that banks decline.

Capacity comparison: large bank sub-lines support $1B+ commitments; private credit individual loans typically max at $200M to $500M, though syndication can scale higher. For very large funds, banks are still the realistic counterpart for the largest facilities.

Sponsor playbook: include both bank and private-credit lenders in fund-finance bake-offs. Bank execution typically wins the headline pricing; private credit may offer flexibility on structure, covenants, or use-of-proceeds restrictions that banks won't match. The right answer is fact-specific.