Global private credit assets under management exceeded USD $2.1 trillion in 2025, according to Preqin estimates. A significant portion of that capital is now seeking opportunities in deals that Canadian chartered banks—which tightened commercial lending standards throughout late 2025—have been increasingly reluctant to finance.
This gap is where many of Metro Vancouver’s most resilient companies operate: they are revenue-positive, growing at 15% to 30% annually, and generating consistent EBITDA, but they lack the hypergrowth profile required by institutional venture equity. For years, founders in this corridor have faced an uncomfortable binary: sell earlier than planned or accept excessive dilution. Private credit is changing that calculus.
What private credit is (and isn't)
Private credit is debt that originates outside of traditional banks or public bond markets. It encompasses senior secured term loans, unitranche facilities—which combine senior and subordinated debt—mezzanine financing, and revenue-based structures. The lender is typically a fund, such as a pension-backed, insurance-backed, or independent credit manager, rather than a deposit-taking institution.
Pricing reflects this risk profile. While a Schedule A bank might offer a creditworthy borrower prime plus 150–200 basis points on a revolving facility, a private credit fund writing a unitranche into a $20 million EBITDA business typically prices at 600–900 basis points over CORRA (the Canadian Overnight Repo Rate Average, which replaced CDOR in 2024). While this appears expensive, it is often more cost-effective than selling 20% to 30% of a company to a growth equity fund at a valuation tied to aggressive, uncertain targets.
The BC deal environment
Vancouver law firms, including Fasken, Blake Cassels & Graydon, and McCarthy Tétrault, have expanded their private credit practices to support the influx of U.S. and Ontario-based credit funds seeking counsel on BC-domiciled transactions. The BC Securities Commission's exempt market dealer registry has grown steadily, with more registrants focusing on private debt placement.
The Business Development Bank of Canada's Growth & Transition Capital program remains a vital resource for mid-market BC companies, offering ticket sizes from $3 million to $35 million. While valuable for companies that lack the EBITDA profile to attract private funds, the BDC program is constrained by federal policy objectives and cannot absorb the total demand from the province's maturing founder cohort.
Private funds operate in the space above and alongside the BDC: they offer faster execution and larger cheque sizes without the same mandate constraints. The trade-off is higher pricing and increased covenant intensity.
A deal structure, illustrated
Consider a B2B SaaS company with $18 million in ARR, 75% gross margins, and $4 million in EBITDA seeking to acquire a competitor for $12 million. The founders wish to avoid further equity dilution after having already conceded 35% in previous rounds.
A private credit fund might structure a $10 million unitranche facility: $7 million term, $3 million delayed draw for the acquisition. Pricing is CORRA plus 725 basis points. Because CORRA is a floating rate, the 10.5% all-in cost is an estimate based on current market conditions. With a 2% origination fee, a 1% exit fee, and a warrant covering 2–3% of the company, the total cost of capital over a four-year hold is approximately 12–13% annually. For the founders, this preserves control and avoids the significant dilution of an equity raise.
Understanding covenants
Covenants are the primary risk for borrowers. Private credit documents often include maintenance covenants—financial tests that must be satisfied quarterly. Common tests include minimum EBITDA, maximum leverage (total debt divided by EBITDA, typically 3.0–4.5x), and minimum liquidity. Unlike a bank covenant violation, which may be manageable, a private credit violation can trigger acceleration, significant fees, and a forced negotiation from a position of weakness.
Advisers recommend modeling covenants with a 20% revenue shortfall factored in before signing. If the facility remains viable under that scenario, the terms are likely sustainable.
The Canadian deployment trend
The Canadian Alternative Investment Council reports accelerating private credit deployment into Canadian mid-market transactions. Refinitiv/LSEG data confirms that deal counts in the sub-$50 million range are growing faster than larger transactions—the precise segment where BC's founder ecosystem is most active.
Founders must also address currency risk. U.S.-domiciled funds lending in USD create FX exposure for companies with CAD revenues. Well-structured deals should denominate in CAD or include a currency hedge.
What to watch
- BDC's program evolution: BDC has signalled interest in co-investing alongside private credit funds, which could lower the blended cost of capital for BC borrowers.
- Covenant reset pressure: If the economic environment softens, expect private credit funds to tighten covenant packages on new deals.
- Legal infrastructure: The volume of private credit mandates at major Vancouver law firms remains a leading indicator of regional market activity.
- Exempt market growth: Monitor the BC Securities Commission's exempt market dealer registry quarterly to track expanding distribution capacity for private debt.
