Invest in Private Credit as an Individual in TExas NOW!

How to Invest in Private Credit as an Individual: A Texan’s Guide to Alternative Yields

Invest in Private Credit as an Individual in Texas NOW! For too long, the world of private credit was an exclusive club, reserved for institutional giants and ultra-high-net-worth investors. But in today’s evolving financial landscape, the gates are slowly opening. Individual investors, particularly those in a dynamic market like Texas, are increasingly seeking ways to access this powerful asset class to diversify their portfolios and potentially unlock higher yields.

If you’ve heard the buzz about private credit but aren’t sure how an individual like you can get involved, this comprehensive guide is for you. We’ll demystify what private credit is, explore its compelling benefits and inherent risks, outline the various pathways for individual investment, detail typical rates and requirements, and highlight why the Lone Star State is a hotbed for these opportunities. We’ll also introduce GHC Funding (www.ghcfunding.com) as a key player in the commercial real estate (CRE) and business lending space that underpins many private credit investments.

What Exactly is Private Credit? The Foundation for Individual Investors

At its core, private credit refers to debt financing provided by non-bank lenders directly to companies or projects. Unlike traditional bank loans, which are often standardized and heavily regulated, or publicly traded corporate bonds, which are bought and sold on open exchanges, private credit deals are typically bespoke. They are negotiated bilaterally between the lender and the borrower, offering a high degree of customization and flexibility.

The growth of private credit has been nothing short of explosive. Post-2008 financial crisis, stricter regulations prompted traditional banks to pull back from certain types of lending, particularly to middle-market companies and those with unique capital needs. This created a significant void, which agile private credit providers were eager to fill. For individual investors, this means a new frontier of investment possibilities.

Understanding the Landscape: Key Types of Private Credit

Before diving into how to invest, it’s crucial to understand the different flavors of private credit:

• Direct Lending (Senior Secured & Unitranche): This is the most common form. Private credit funds provide senior secured loans directly to companies, often middle-market businesses (those with revenues generally between million and billion) that find it challenging to secure traditional bank financing. “Senior secured” means these loans are typically paid back first in the event of a borrower’s default, and they are backed by collateral. “Unitranche” loans combine senior and subordinated debt into a single debt instrument, offering simplicity to borrowers and a blend of risk/return to lenders.
• Mezzanine Debt: This is a hybrid form of financing that sits between a company’s senior debt and equity. It’s often unsecured or subordinated, meaning it gets paid after senior lenders in a default scenario. To compensate for this higher risk, mezzanine debt typically offers higher interest rates and often includes an “equity kicker” – warrants or options that allow the lender to convert a portion of the debt into equity, giving them a share in the company’s upside if it performs well.
• Distressed Debt: This involves investing in the debt of financially troubled companies. The goal is to profit from the company’s restructuring, reorganization, or liquidation. This is a more specialized and higher-risk strategy, requiring deep expertise in corporate turnarounds.
• Asset-Based Lending (ABL): These are loans secured by specific, identifiable assets such as accounts receivable, inventory, equipment, or even intellectual property. ABL is often used by companies that have fluctuating cash flows or less traditional assets that banks might not value highly.
• Real Estate Private Debt: This focuses specifically on financing real estate projects. It includes:
  • Bridge Loans: Short-term loans used to “bridge” a financing gap, often for acquisitions, property repositioning, or pending long-term financing.
  • Construction Loans: Financing for new building projects.
  • Preferred Equity: A hybrid instrument that sits between traditional debt and common equity, offering higher returns than debt but less risk than common equity.

Why Private Credit for Your Investment Portfolio? The Compelling Benefits

As an individual investor, you might be asking: why should I consider private credit when I can just buy stocks or bonds? The answer lies in several compelling advantages:

1. Enhanced Yields: The “Illiquidity Premium”Private credit typically offers higher yields compared to publicly traded bonds or bank deposits. This “illiquidity premium” compensates investors for the fact that these investments are not easily bought and sold on public exchanges. Because you’re committing capital for a longer, less flexible period, you can earn a higher return. For example, recent estimates for 2025 suggest potential total returns for private credit in the range of 8.5% to 10% (Source: WisdomTree). This is significantly higher than many traditional fixed-income options.
2. Portfolio DiversificationPrivate credit can be an excellent diversifier for your investment portfolio. Its returns have historically shown a low correlation with public markets (like stocks and publicly traded bonds). This means that private credit investments may perform differently from your other assets during various market cycles, potentially reducing overall portfolio volatility and enhancing risk-adjusted returns (Source: Bankrate).
3. Protection Against Rising Interest Rates (Floating Rates)A significant portion of private credit loans feature floating interest rates. This means the interest payments adjust periodically based on a benchmark rate, such as SOFR (Secured Overnight Financing Rate), plus a fixed spread. In an environment of rising interest rates, this can be a major advantage for investors, as your income stream increases, helping to protect your returns from inflationary pressures (Source: SSGA).
4. Potential Downside ProtectionMany private credit deals are secured by tangible assets (collateral) and include robust loan covenants. These covenants are specific conditions that borrowers must adhere to (e.g., maintaining certain financial ratios). If a borrower violates these covenants, the lender often has the right to intervene, potentially accelerating repayment or taking control of collateral. This structured protection can provide a cushion against losses, making private credit an attractive option for risk-aware investors (Source: SSGA).
5. Access to Underserved MarketsPrivate credit primarily targets the middle market – businesses that are too large for typical small business loans but not yet big enough to access public bond markets. This segment of the economy is vast and vital, but often overlooked by traditional banks. Investing in private credit allows individuals to provide capital to these growth-oriented companies, participating directly in their expansion and success.

Navigating the Risks: What Individual Investors Must Know

While the allure of higher yields and diversification is strong, it’s crucial to approach private credit with a clear understanding of its inherent risks:

1. Illiquidity Risk: This is perhaps the most significant risk for individual investors. Private credit investments are designed to be held for several years, typically 3 to 7 years or even longer. There is no active secondary market like there is for stocks or bonds, meaning you cannot easily sell your investment if you need quick access to your capital. Ensure your investment horizon aligns with the illiquid nature of private credit.
2. Credit/Default Risk: Despite collateral and covenants, there is always the risk that a borrower may default on their loan obligations. While private credit lenders conduct extensive due diligence, economic downturns or specific company-level challenges can impact repayment ability.
3. Complexity and Transparency: Private credit deals can be complex, involving intricate legal structures and financial terms. Compared to public markets, there is less regulatory oversight and transparency, making it harder for the average individual investor to fully understand the underlying assets without professional guidance.
4. Fees: Private credit funds often charge higher fees than traditional mutual funds or ETFs. These can include:
   • Management Fees: An annual percentage of assets under management (e.g., 1-2%).
   • Performance Fees (or Carried Interest): A percentage of profits generated above a certain hurdle rate (e.g., 10-20% of profits). These fees can significantly impact your net returns, so it’s vital to understand the fee structure before investing (Source: Bankrate).
5. Market and Cyclical Risk: While private credit can offer diversification, it’s not entirely immune to broader economic downturns. A severe recession could lead to higher default rates across a fund’s portfolio.
6. Valuation Challenges: Because private credit assets are not publicly traded, their valuation can be subjective and less transparent than publicly traded securities.

Pathways for Individuals: How You Can Invest in Private Credit

The accessibility of private credit to individual investors has expanded significantly beyond the traditional ultra-high-net-worth realm. Here are the primary avenues:

1. Accredited Investor Status: The GatekeeperFor many private credit opportunities, particularly those offering direct access to funds, you will need to qualify as an accredited investor. This designation, set by the SEC, typically requires:
   • An annual income of at least $200,000 (or $300,000 jointly with a spouse) for the past two years, with the expectation of similar income in the current year.
   • A¹ net worth (individually or with a spouse) of at least $1 million, excluding the value of your primary residence.
   • Certain professional certifications or roles in the financial industry may also qualify you (Source: Morningstar). Understanding if you meet these criteria is the first step for exploring many private credit investments.
2. Direct Access via Private Credit Funds
   • How it Works: These funds pool capital from multiple investors and then deploy it into various private credit strategies (direct lending, mezzanine, etc.). They are managed by experienced private credit firms.
   • Minimum Investments: Typically high, ranging from $250,000 to $5 million or more, making them suitable for accredited and qualified investors.
   • Structure: Funds are often closed-end (meaning capital is committed for a fixed period) and may involve “capital calls” where investors fund their commitments over time as the fund identifies new investment opportunities. Evergreen funds offer more flexible redemption options but are less common.
3. Business Development Companies (BDCs)
   • How it Works: BDCs are publicly traded companies that invest primarily in the debt and equity of private companies, often middle-market firms. Think of them as publicly traded private equity/credit funds.
   • Accessibility: Since BDCs are publicly traded on exchanges, they offer a way for any investor (accredited or not) to gain exposure to private credit. You can buy shares of a BDC through a standard brokerage account.
   • Liquidity: Shares can be bought and sold daily, offering greater liquidity than direct private credit funds.
   • Yield: BDCs are required to distribute at least 90% of their taxable income to shareholders, making them attractive for income-seeking investors.²
   • Risk: While liquid, BDC share prices can fluctuate, and their performance is tied to the underlying private companies they lend to.
4. Interval Funds / Tender Offer Funds
   • How it Works: These are hybrid investment vehicles that combine features of open-end mutual funds and closed-end funds. They invest in illiquid assets like private credit but offer periodic (e.g., quarterly) limited liquidity windows where investors can “tender” a portion of their shares for redemption.
   • Accessibility: Often available to accredited investors, sometimes with lower minimums than traditional private credit funds.
   • Benefit: Provide some liquidity without forcing the fund to sell illiquid assets at inopportune times.
5. Online Crowdfunding Platforms
   • How it Works: These platforms connect individual investors directly with borrowers or allow them to invest in fractional shares of larger loans. Examples include Percent, Yieldstreet, and Fundrise.
   • Accessibility: Some platforms cater to accredited investors, while others (like Fundrise) have offerings accessible to non-accredited investors with very low minimums (e.g., $500 to $1,000).
   • Benefit: Offers direct exposure to a diversified pool of loans or specific asset classes (like real estate debt) with lower entry barriers.
   • Risk: Due diligence on these platforms is crucial, as the quality of loans and transparency can vary significantly. Understand the underlying assets and the platform’s track record.

Understanding Rates and Requirements for Individual Investors

When considering private credit, it’s essential to have realistic expectations about returns and to understand the specific hurdles to entry.

• Expected Rates of Return: As of early to mid-2025, private credit continues to offer attractive yields. Floating-rate loans, common in private credit, are typically priced at a spread over benchmark rates like SOFR. With 3-month term SOFR hovering around 4.31% (as of March 2025, Source: Hamilton Lane), the overall return for senior secured private credit loans (factoring in the spread, typically 400-800 basis points or more depending on credit quality and leverage) could be in the range of 8% to 12%+. For more subordinated debt or distressed strategies, returns can be higher, often reaching into the mid-teens or even 20%+, reflecting the increased risk. The total return for private credit in 2025 is expected to be in the range of 8.5% – 10% (Source: WisdomTree).
• Fees Impact: Remember that these gross returns are before fees. Management fees (1-2% annually) and performance fees (10-20% of profits above a hurdle) will reduce your net return. Always ask for the net IRR (Internal Rate of Return) when evaluating funds.
• Accredited Investor Requirement: As discussed, this remains a primary barrier for many. If you don’t meet the income or net worth thresholds, your options will be limited to publicly traded BDCs, certain interval funds, or crowdfunding platforms that specifically cater to non-accredited investors.
• Minimum Investment Amounts: These vary wildly:
  • Publicly Traded BDCs/ETFs: As low as the price of one share (e.g., $10-$50 per share).
  • Online Crowdfunding Platforms: Can range from $500 to $25,000.
  • Interval Funds: Typically $25,000 to $100,000+.
  • Private Credit Funds: Often $250,000 to $5 million+.
• Time Horizon: Be prepared for a long-term commitment. You are tying up your capital for a period, so ensure these funds are not needed for immediate expenses or other short-term goals.

The Lone Star State & Private Credit: A Texas Investor’s Perspective

Texas is not just a state; it’s an economic powerhouse, and its dynamic growth makes it an incredibly fertile ground for private credit investment. For individuals looking to invest in private credit, understanding why Texas is so attractive is key:

• Robust Economic Growth: Texas consistently ranks among the top states for GDP growth and job creation. Industries like energy (including renewables), technology, healthcare, manufacturing, aerospace, and agriculture are thriving, fueling a constant demand for capital.
• Population Boom: Major metropolitan areas like Houston, Dallas-Fort Worth, Austin, and San Antonio are experiencing significant population influxes. This growth drives massive demand for commercial real estate development (multifamily, industrial, office, retail) and supports an expanding base of small and middle-market businesses.
• Diverse Business Landscape: From energy giants to innovative tech startups and vast agricultural enterprises, Texas boasts a remarkably diverse business landscape. This diversity creates a wide array of lending opportunities for private credit firms, ranging from working capital loans for manufacturing firms to acquisition financing for healthcare providers.
• Entrepreneurial Spirit: Texas has a vibrant entrepreneurial ecosystem. New businesses and growing ventures often seek flexible, non-traditional financing that private credit excels at providing, especially when traditional banks may not be as nimble or willing to take on certain risks.
• Significant Real Estate Activity: With ongoing population and business expansion, commercial real estate development and transactions are booming across Texas. This creates a strong need for specialized real estate private debt, such as bridge loans for developers or construction financing for new projects.

For a Texas investor, investing in private credit can mean direct exposure to the very economic engines driving the state’s prosperity. Whether through a fund that lends to Texas-based businesses or through a platform specializing in Texas real estate debt, the opportunities are abundant.

GHC Funding: Your Key Player in Texas Business and CRE Lending

When we talk about investing in private credit as an individual, we are primarily discussing investing into a fund or platform that then makes loans. But who are these loans actually being made to? Often, they are made to businesses and commercial real estate developers who are seeking capital outside of traditional banking channels.

This is precisely where GHC Funding (www.ghcfunding.com) plays a vital role. While GHC Funding directly provides loans to businesses and commercial real estate investors (rather than being an investment vehicle for individuals), they represent the very type of agile, responsive private lender that fuels the private credit market.

Why GHC Funding is a Go-To Lender for Texas Businesses and CRE Investors:

• Specialized in Business and CRE Loans: GHC Funding focuses exclusively on commercial real estate and various business financing solutions. They understand the specific needs of these sectors, from complex development projects to working capital for growing companies.
• Flexible and Customized Solutions: Unlike rigid bank products, GHC Funding is known for its ability to tailor loan terms, repayment schedules, and collateral requirements to fit the unique circumstances of each borrower. This flexibility is a hallmark of private credit.
• Speed and Efficiency: In Texas’s fast-paced business and real estate markets, time is money. GHC Funding prioritizes efficient underwriting and faster funding compared to many traditional banks, allowing businesses and investors to seize time-sensitive opportunities.
• Broader Lending Criteria: GHC Funding often considers a wider range of factors than traditional banks, making them a viable option for businesses that might have been overlooked elsewhere due to age, specific industry, or unconventional collateral. They look at the overall viability and potential of the project or business.
• Expert Guidance: Navigating commercial financing can be complex. The team at GHC Funding brings extensive experience and expertise, providing valuable guidance throughout the loan process, ensuring transparency and clarity for Texas borrowers.

For a Texas business owner or commercial real estate investor looking to secure private credit for their ventures—the very type of borrowers that private credit investors are backing—GHC Funding stands out as a reliable and efficient partner.

Essential External Resources for Texas Investors

As an individual investor in Texas, arming yourself with knowledge and understanding the local landscape is critical. Here are some invaluable external resources:

• Texas State Securities Board (SSB): This is your first stop for investor protection in Texas. The SSB regulates the securities industry in the state, including broker-dealers, investment advisers, and securities offerings. Their website provides investor education, tips for avoiding fraud, and a searchable database to check the registration of firms and individuals. This is crucial for verifying any entity you consider investing with. https://www.ssb.texas.gov/
• Texas Department of Banking (DOB): While private credit is often “non-bank,” the DOB oversees state-chartered banks and other financial institutions. Understanding their role can provide context for the broader financial services landscape in Texas. https://www.dob.texas.gov/
• Texas Comptroller of Public Accounts: This office provides a wealth of economic data, state financial reports, and business resources. For investors, it’s an excellent source for understanding Texas’s economic health, demographic trends, and industry-specific data that can inform investment decisions. https://comptroller.texas.gov/
• Texas Economic Development (Office of the Governor): This resource offers insights into state-level economic development initiatives, business incentives, and key industries driving growth in Texas. It can help investors identify sectors or regions within the state that are poised for significant expansion. https://gov.texas.gov/business/
• Local Chambers of Commerce (e.g., Dallas Regional Chamber, Greater Houston Partnership, Austin Chamber of Commerce, San Antonio Chamber of Commerce): These organizations provide granular insights into specific metropolitan economies, local business trends, and networking opportunities. Exploring their websites can offer a more localized perspective on investment opportunities. (Simply search for “Dallas Regional Chamber,” “Houston Chamber of Commerce,” etc., to find their official sites.)
• FINRA (Financial Industry Regulatory Authority): While a national organization, FINRA offers robust investor education resources, including tools to check the backgrounds of brokers and investment advisors. It’s a foundational resource for any U.S. investor. https://www.finra.org/

Conclusion: Is Private Credit Right for You?

Investing in private credit as an individual can be a sophisticated strategy to diversify your portfolio, potentially enhance returns, and gain exposure to the powerful engine of private enterprise. The growing accessibility, particularly through BDCs and online platforms, means this asset class is no longer exclusively out of reach.

However, it’s not without its complexities and risks, primarily illiquidity and the need for thorough due diligence. For Texas investors, the state’s booming economy, diverse industries, and strong real estate market present a fertile ground for these opportunities, whether directly through a fund or indirectly through publicly traded vehicles.

Before committing capital, carefully assess your financial goals, risk tolerance, and investment horizon. Consider speaking with a qualified financial advisor who can help you determine if private credit aligns with your overall investment strategy. And for Texas business owners and commercial real estate investors looking for the agile capital that fuels the private credit market, remember that GHC Funding (www.ghcfunding.com) stands ready as a specialized and responsive lending partner. Embrace the power of private credit, and strategically position your portfolio for the future.