How Wholesale Funding Is Powering the Next Generation of Private Credit in Australia

Traditional banks are no longer the sole players in providing credit to small and mid-sized businesses. A new wave of private credit is emerging, fueled heavily by wholesale funding. This change isn’t only a footnote in financial circles; it’s a fundamental transformation that’s opening up fresh opportunities for investors and borrowers.

This article highlights the role wholesale funding plays in supporting the growth of private credit, how it differs from traditional models, and what this means for Australia's financial future.

• Growing Private Credit in Australia

Australia’s private credit market is expanding fast. Over the past few years, investors have become increasingly interested in assets outside the public markets, searching for diversification and stable returns.

At the same time, banks constrained by tighter regulations and capital requirements aren’t always able or willing to meet every lending need. As a result, private debt funds and investors are stepping in. Private credit in Australia has grown significantly, and it’s expected to continue. This rise signals a shift away from reliance on traditional banking for business finance.

• How Does Traditional Lending Get Disrupted?

Banks have been the gatekeepers of business finance, but they’re not always quick or flexible enough for the modern economy. Alternative sources like private debt funds, supported by wholesale funding, are filling the cracks.

Wholesale funding allows these private lenders to raise large amounts of capital from institutional investors, high-net-worth individuals, and family offices. Instead of offering loans directly to consumers, these funds pool capital to make tailored loans to businesses or project developers. 

• Understanding Wholesale Funding

Wholesale funding is a way for financial institutions or funds to acquire large sums of capital from a smaller number of sophisticated investors. This is different from retail funding, where banks collect deposits from everyday consumers.

These wholesale investors include:

• High-net-worth individuals (HNWIs)

• Institutional investors (like pension funds and insurance companies)

• Family offices

This group is looking for stable, asset-backed investments that can diversify their portfolios.

Wholesale funding plays a crucial role in modern capital markets because it supports a range of innovative lending structures. These funds are flexible, quick to deploy capital, and capable of tailoring debt solutions more precisely than traditional banks. 

• Filling the Capital Gap with Private Credit

The growth of private credit is a response to the “capital gap” left by banks. Post-GFC regulations have made traditional lenders more cautious, reducing their appetite for certain types of risk. Meanwhile, many businesses need funding to grow, invest, or stay afloat.

This is where wholesale funding-backed private credit shines. It provides a lifeline for SMEs and mid-sized companies that might hit a wall when trying to secure bank loans.

By offering flexible, quicker financing options, private credit helps these firms seize opportunities without the lengthy delays of traditional borrowing. In effect, wholesale funding creates a vital link, bridging investors’ capital and businesses’ needs.

• Why Wholesale Funding Fuels Innovation in Lending

Lenders can deploy capital in customised ways, adjusting loan terms, structures, and maturities as needed. This isn’t a one-size-fits-all approach.

For example, innovative credit structures like mezzanine debt, structured financing, or project-specific funds are all enabled by wholesale backing. These structures allow lenders to better manage risk and create tailored solutions, leading to more favourable terms for borrowers.

Compared to traditional bank loans, private credit backed by wholesale funding can be arranged faster, which is critical in competitive or urgent scenarios. This flexibility means lenders can also include features like milestone-based drawdowns or performance-based covenants that traditional banks might shy away from.

• Investor Appeal: Why Wholesale Investors Are Interested

For wholesale investors, private credit represents a compelling asset class. It’s less volatile than equities, asset-backed, and delivers stable, predictable yields, appealing traits in uncertain markets.

Many are also attracted to the non-dilutive aspect of private credit investments. They aren’t giving up equity or ownership, providing debt capital, which offers safer risk profiles with fixed returns.

The sector’s growth demonstrates a broader shift among sophisticated investors seeking to balance their portfolios and secure consistent income streams.

• Rixon Capital’s Part in the Transformation

Leading the charge in this evolving space is Rixon Capital. Their approach to private credit and wholesale funding emphasizes structured, scalable solutions aimed at institutional and sophisticated investors.

By offering tailored, structured wholesale-backed lending opportunities, Rixon helps create a more dynamic, accessible private credit market in Australia. They facilitate access to innovative credit structures that weren’t as easily available before, supporting borrower needs and investor appetite.

You can learn more about how Rixon is shaping this future at their website: https://rixon.capital/wholesale-funding/.

• Conclusion

The intersection of wholesale funding and private credit innovation is transforming Australia's financial ecosystem. By providing flexible, tailored capital, wholesale funding is not only supporting the growth of private debt but also enabling a more resilient and inclusive funding environment.

As these models grow more sophisticated and widespread, both investors and businesses stand to benefit. It’s a win-win scenario for more choices, faster access, and a broader horizon for innovation in lending.