Still Raising Capital the Hard Way?

For many founders and private credit platforms, capital raising still begins with the same tools. A bilateral loan. A subscription agreement. A small group of investors, each with their own terms and expectations.

At the outset, this works. Capital moves quickly. Relationships feel direct. Documentation is familiar.

The difficulty is not how these structures begin. It is how they behave once a strategy starts to grow.

As private credit businesses scale, the friction inside one-to-one funding models becomes harder to ignore. Each new investor adds work rather than capacity. Reporting starts to diverge. Amendments take longer. Capital becomes harder to manage at exactly the point when more of it is needed.

At that stage, the issue is rarely the strategy. It is the structure supporting it.

Why One-to-One Funding Struggles to Scale

Bilateral loans and subscription agreements are built around individual relationships. Terms are negotiated separately. Reporting is agreed case by case. Enforcement depends as much on dialogue as on documentation.

Early on, that flexibility is useful. Later, it becomes a burden.

As capital requirements increase, issuers find themselves managing a growing set of agreements that all reference the same activity but behave differently in practice. Covenants are applied unevenly. Information arrives in different formats. Transfers require consent. Changes must be negotiated again and again.

None of this improves credit outcomes. It simply absorbs time.

Over time, the capital structure becomes fragile. Funding depends on a small number of relationships. Refinancing becomes uncertain. A single investor stepping back can have an outsized effect, even when assets continue to perform.

What Institutional Capital Looks for in Practice

Institutional investors do not avoid private credit because it is complex. They avoid it when it is unclear.

Professional allocators are comfortable underwriting risk, but they expect that risk to be expressed in a way they can analyse, hold, and monitor. As private credit has grown, that expectation has only strengthened.

Data from Preqin shows global private credit assets have grown beyond USD 1.7 trillion, yet much capital at the smaller end of the market is still raised through structures that do not align with how institutions deploy money at scale.

The problem is not appetite. It is compatibility.

Private banks and professional investors need instruments that fit their systems. They need predictable cash-flow mechanics. They need documentation that behaves the same way in calm markets as it does under stress. Bespoke agreements make that difficult.

Why Credit Linked Notes Change the Dynamic

Credit Linked Notes address this problem by standardising how capital enters a strategy.

Rather than negotiating each funding relationship separately, a CLN creates a single framework that all investors share. The exposure is defined once. The documentation applies equally. Cash flows follow agreed rules rather than individual preferences.

For issuers, this means growth no longer increases complexity. New investors can participate without reopening terms. Existing investors retain the same position. The structure does not need to be rebuilt as capital grows.

For investors, the experience is simpler. Exposure is held in a security format they recognise. Performance is measured against set mechanics. Risk is contractual rather than implied.

This is why CLNs have become common in institutional private credit markets.

Table of Benefits

The Importance of Legal Structure

The credibility of a Credit Linked Note does not come from presentation. It comes from the framework behind it.

In Europe, CLNs are most often issued through Luxembourg securitisation structures. These allow credit exposure to be packaged clearly without creating a fund. Cash-flow priority is defined. Creditor rights are established at the outset. Enforcement paths are known.

Research from PwC highlights that investors increasingly prefer structures where these mechanics are set from day one, rather than negotiated later.

For issuers, this creates room to design responsibly. For investors, it provides confidence that the structure will hold when tested.

Why This Matters in the GCC

This shift is not limited to Europe or the US.

Across the GCC, private credit markets are developing quickly. Family offices, sovereign-linked investors, and regional private banks are becoming more active allocators. While interest in private credit is strong, tolerance for informal structures is limited.

Issuers seeking capital in the region often discover that bilateral notes and subscription agreements do not translate well across borders. Operational fit matters. Reporting expectations matter. Custody matters.

CLNs travel better. They allow exposure to be presented in a form that regional and international investors already understand, without forcing issuers into bank-style infrastructure or premature fund launches.

What Issuers Often Underestimate

One of the most overlooked differences between traditional funding and CLNs is operational effort.

Managing multiple bilateral agreements requires constant legal input, tailored reporting, and ongoing negotiation. Each deviation becomes a discussion. Over time, this pulls attention away from credit performance.

CLNs reduce that drag.

Because the structure is standardised, reporting can be automated. Investor communication becomes simpler. Changes follow documentation rather than precedent. For growing credit platforms, this often proves as valuable as pricing.

A Shift Driven by Scale, Not Fashion

Credit Linked Notes are not a shortcut. They are a response to how private credit has evolved.

As strategies grow and investor bases widen, structures that depend on individual relationships begin to strain. CLNs replace fragmentation with consistency. They allow capital to scale without increasing friction.

That is why many issuers adopt them not at inception, but at the point where their strategy is ready for institutional capital.

Conclusion

Raising capital “the hard way” is rarely intentional. It is usually the result of using structures that no longer fit the business.

Bilateral loans and subscription agreements work well at small scale. Credit Linked Notes are designed for what comes next. They allow capital to grow without forcing complexity to grow alongside it.

For issuers preparing to move beyond one-to-one funding, the real question is not whether CLNs are relevant. It is whether the current structure can keep up.