For most of the past several decades, an Alberta company seeking growth or acquisition capital had one main option beyond its own retained earnings: a term loan or operating line from a chartered bank, ATB Financial or a credit union. That is changing. Private credit, meaning loans made by investment funds and other non-bank lenders rather than deposit-taking institutions, has grown into a significant part of Canada’s mid-market financing landscape, and it is increasingly visible on the Prairies.

The scale of that growth is notable. Canadian investment-fund holdings of private credit have reached roughly $54 billion this year, an increase of more than 60% since 2020. Over two-fifths of that exposure is tied to real estate, but a growing share is corporate lending to mid-sized operating businesses, and it is that segment that matters most to Alberta owners.

The demand is being driven by the same forces reshaping the broader lending market: ownership transitions, as founders sell or hand over to successors; consolidation, as strategic buyers roll up fragmented sectors; and the growing complexity of transactions that do not fit neatly into a conventional bank’s credit box. Bank debt remains the cheapest and most appropriate capital for many situations, but it is no longer the only serious option.

Key Takeaways

• Private credit held by Canadian investment funds has grown to roughly $54 billion, up more than 60% since 2020
• Ownership transitions and consolidation are the main reasons mid-market companies are looking beyond bank debt
• Unitranche, mezzanine and asset-based lending each solve a different problem and carry a different cost
• Higher pricing is often the trade for speed, flexibility and certainty of funds in a competitive acquisition
• The right structure depends on the company’s cash flow, assets and purpose, and should be tested against a bank alternative first

How Private Credit Grew in Canada

Private credit fills the space between senior bank lending and equity. Its lenders are typically pension plans, insurers, family offices and specialized funds that raise committed capital and deploy it as loans, often to companies that are too large for small-business programs and too small, too levered or too unusual for a bank’s standard credit process. Because they are not funded by deposits, they can take more structural risk in exchange for higher yields.

The Canadian market’s growth reflects both supply and demand: institutional investors have sought floating-rate income secured over borrower assets, while a prolonged period of high policy rates, tighter bank underwriting and a wave of ownership transitions have produced many borrowers whose needs exceed what a conventional lender will provide on its own.

For Alberta, the timing is significant. The Bank of Canada’s policy rate has fallen from 5.00% to 2.75% since June 2024 and has been held at that level since March, which has narrowed the gap between bank and non-bank pricing while leaving banks cautious in tariff-exposed sectors. Alberta’s tax environment, including an 8% general corporate rate and no provincial sales tax, means that many mid-market companies generate the kind of free cash flow that private lenders look for.

Why Ownership Transitions and Consolidation Are Driving Demand

The succession wave described by the Canadian Federation of Independent Business, in which roughly three-quarters of small business owners plan to exit within a decade, is producing a steady stream of transactions that need financing. Management buyouts, sales to employees, family transitions and third-party acquisitions all require capital, and often more of it than the buyer can raise from a bank against the target’s assets alone. Private credit lenders are willing to lend against cash flow and enterprise value, which is precisely what a buyer of a service business needs.

Consolidation is the other driver. Strategic acquirers building platforms in energy services, industrial distribution, healthcare and business services frequently need to close several acquisitions in sequence. A committed acquisition facility from a private lender can be drawn as each deal closes, without renegotiating terms each time, which is a significant advantage over bank facilities that require fresh approval for each add-on.

Alberta’s industry mix accentuates both trends. The province’s energy and energy-services sectors are consolidating, and many of the founder-owned companies that serve them were established in the same generation and are approaching transition together. The mid-market is increasingly being financed by a combination of bank, private credit and vendor capital.

Bank Debt Remains the Starting Point

None of this makes bank debt obsolete. For a profitable Alberta company with tangible assets, a stable customer base and a modest leverage requirement, a term loan and operating line from a bank, ATB Financial or a credit union will almost always be the lowest-cost option. Government-supported programs extend that reach further down the size scale: the Canada Small Business Financing Program, delivered through these same lenders, offers up to $1.15 million per borrower, including up to $1 million in term loans and up to $150,000 in a line of credit, for businesses with gross annual revenue of $10 million or less.

The right question, then, is not whether private credit is better than bank debt but where the bank’s appetite ends. Banks are constrained by regulatory capital, by policies that limit leverage relative to cash flow and by a preference for hard collateral. When a transaction requires more leverage than that, needs to close faster than a bank’s credit process allows, or involves a business whose value lies in contracts and people rather than equipment, the conversation naturally moves to non-bank capital.

Three Structures Alberta Companies Should Understand

Unitranche

A unitranche facility combines what would otherwise be senior and subordinated debt into a single loan with one lender, one set of documents and one blended interest rate. Its appeal is simplicity and speed: there is no intercreditor negotiation, and the borrower deals with a single counterparty on covenants, waivers and amendments. Unitranche is most common in acquisition financing, where certainty of closing matters and the buyer is willing to pay a higher blended rate for a facility that can be committed quickly and drawn in full.

Mezzanine and Subordinated Debt

Mezzanine debt sits behind senior bank lending and ahead of equity. It is typically unsecured or secured on a subordinated basis, carries a higher coupon, often with a portion paid in kind rather than in cash, and may include warrants or another equity feature. For an Alberta owner, mezzanine is a tool for bridging the gap between what the bank will lend and the total capital needed, without giving up the level of ownership a new equity partner would demand. It works best for companies with predictable cash flow that can service a higher-cost layer for a defined period.

Asset-Based Lending

Asset-based lending, or ABL, is a revolving facility sized against a borrowing base of receivables, inventory and sometimes equipment, monitored frequently by the lender. Rather than relying on covenants tied to earnings, ABL relies on the value and liquidity of the collateral, which makes it suitable for businesses with thin or volatile margins but substantial working capital, such as distributors, manufacturers and contractors. In a period of tariff-driven demand swings, an ABL facility can expand and contract with the business in a way a fixed term loan cannot.

Pricing, Covenants, Speed and Certainty of Funds

Private credit costs more than bank debt, and owners should expect that. What the borrower receives in exchange is often decisive: a committed facility that will fund on the closing date, a lender that has priced the risk rather than declined it, and terms that can be tailored to the transaction’s cash flow profile, including interest-only periods or payment-in-kind features.

Covenants differ as well. Bank facilities in the Alberta mid-market typically carry maintenance covenants tested quarterly, such as fixed-charge coverage and leverage ratios, and breaching them can trigger a review of the whole relationship. Private lenders may set fewer covenants, or set them with more headroom, but they will monitor closely and act decisively if performance deteriorates. Owners should read the default and remedy provisions with as much care as the pricing grid.

Speed and certainty of funds are where private credit has built its reputation. In a competitive sale process, a buyer whose financing is committed before the letter of intent is signed has a material advantage over one whose bank approval is still pending. Sellers and their advisors now ask about financing certainty early.

Choosing the Right Capital for the Situation

The decision framework is straightforward in principle. Start with the purpose: is the capital for an acquisition, a shareholder buyout, a growth investment or a working-capital need? Then assess the company’s capacity: how much can cash flow reliably service through a downturn, and what assets support the borrowing? Only then compare structures, and always benchmark a private-credit proposal against the best available bank alternative, including any government-supported programs the company qualifies for.

Owners should also consider the relationship dimension. A bank is a long-term operating partner that provides cash management, foreign exchange and day-to-day credit; a private lender is usually a transaction partner with a defined horizon. Many Alberta companies end up with both, using the bank for operating needs and a private facility for a specific acquisition or transition, coordinated through an intercreditor agreement.

With the Bank of Canada’s next decision scheduled for September 17 and tariff uncertainty still weighing on trade-exposed sectors, access to capital that can be structured around a specific situation is a genuine advantage. Private credit has arrived on the Prairies not as a replacement for bank debt but as an additional tool, and the owners who understand when to use it will be better placed to seize the opportunities that ownership transitions and consolidation are creating.