If you’re a regular reader of this column, you’re well aware of private equity’s influence in the tire dealership arena. But what do you know about private debt?
Private debt, also known as private credit, refers to loans provided outside of traditional banks. Unlike private equity, which often requires owners to sell a majority of their business, private debt allows owners to raise capital while maintaining full control.
Private debt has now overtaken traditional banks as the primary source of financing for many private equity transactions.
Private equity firms are leveraging private debt to fund their acquisitions. Why couldn’t you? Instead of selling to private equity, you could borrow like private equity, using debt to expand and scale on your own terms.
Private debt can take different forms, including senior debt (traditional loans), mezzanine debt (a mix of debt and equity), unitranche financing (a combination of senior and mezzaninedebt) and asset-backed loans (secured by real estate or other meaningful assets).
Private debt is becoming a major force in mergers and acquisitions — helping businesses grow, acquire competitors and modernize operations without bringing in majority investors.
One reason for its rise is that banks have become increasingly risk-averse due to tighter regulations. Strict capital requirements have made it harder for banks to lend aggressively, creating an opening for private credit firms that can move quickly and offer more flexible financing solutions.
Private lenders focus on cash flow and business fundamentals rather than just collateral, making capital more accessible for growing companies.
For tire dealers, private debt provides an alternative way to fund expansion. Instead of waiting years to accumulate cash or relying on small bank loans, private debt enables businesses to finance larger acquisitions and scale more aggressively. It also allows owners to invest in new locations, technology and automation without straining cash flow. Some may even use private debt to acquire competitors of equal or greater size, an approach typically reserved for private equity-backed consolidators.
Private equity provides capital, but at the cost of ownership. If an owner wants a liquidity event or a strategic partner to help scale, private equity may be the right fit. However, selling to private equity means bringing in a new partner who may control key decisions and have a timeline for exiting — typically within three to seven years.
Private debt, on the other hand, allows business owners to retain control while still accessing capital. Unlike private equity, private debt does not provide an upfront payout, but it offers a way to fund expansion without selling significant interest in the company. Operators who want to grow on their terms may find private debt a more attractive alternative.
Private debt works best for profitable, growth-oriented businesses with strong cash flow. Companies with EBITDA of $3 million or more and a clear expansion plan — whether through acquisitions or operational investments — are prime candidates for this type of financing.
Who provides private debt? While many business owners first consider banks for financing, private debt extends far beyond traditional lenders. Some of the major players include asset managers, pension funds, large global banks, insurance companies, family offices and ultra-high-net-worth individuals. These entities have deep pockets and long investment horizons, making them attractive partners. The key is to find a lender who understands your business and can grow with your business in the long-term.
Before pursuing private debt, you should first evaluate your debt capacity. How much leverage can your business handle while maintaining healthy cash flow? Next, you must understand the cost of capital. Private debt is typically more expensive than traditional bank loans, but offers greater flexibility and fewer restrictions. And always plan for long-term growth. Lenders want to see a clear strategy for how their funds will be used.
Private equity firms have used debt as a tool for growth for years, leveraging capital to scale businesses quickly. But business owners don’t have to sell to private equity in order to participate in the same strategy.
Private debt allows operators to expand on their terms, maintain majority ownership and invest in long-term growth without outside control. Before assuming that selling is your only option, it’s also worth asking, “What if you could grow your business the same way private equity firms do: without giving up ownership?”
For many independent tire dealers, private debt offers the capital needed to scale, while keeping the business in the owner’s hands. If that sounds appealing, it may be time to explore private debt as a strategic growth tool.
