Direct Loans are loans that are directly negotiated between a lender and a borrower.
Historically, a company in need of money would typically borrow it from a mainstream bank. After the Global Financial Crisis (GFC) of 2008, US regulators – seeking to avoid what led to
the GFC in the first place – restricted how much money mainstream banks could lend to companies.
Enter direct lenders, who came onto the scene to seek to fill that void. Direct lenders form a part of private markets, and therefore are generally not subject to the same regulations as mainstream banks.
Demand took off, with more and more borrowers turning away from the mainstream banks [1] – especially among small and medium-sized enterprises (SMEs), otherwise referred to by the industry as ‘the lower-middle market’.
