Alternative Investment Funds
Pooled vehicles investing across venture, private equity, private credit and special situations, each with distinct mandates and expectations.
Alternative investment funding
When conventional capital does not fit the situation.
Between bank credit and institutional equity sits a broad category of structured, flexible capital — more expensive than the first, less dilutive than the second, and frequently the better answer.
FlexibilityStructure-led
SpeedOften faster than banks
CostAbove bank credit
What alternative funding covers
A category defined by what it is not.
“Alternative” is an unhelpful label for a genuinely useful set of instruments. What unites them is that they are provided by parties other than conventional banks, and structured around a specific situation rather than a standard product.
In India this includes Alternative Investment Funds across their categories, private credit and non-bank lenders, venture debt providers, structured and mezzanine capital, and instruments built around receivables or specific contracts.
Businesses generally arrive here for one of three reasons: the requirement does not fit a standard bank product, the timeline is shorter than a bank process allows, or the situation carries complexity that conventional credit will not underwrite.
An honest note on cost: alternative capital generally prices above bank credit, because it is taking risk or providing flexibility that banks will not. That premium is worth paying when it buys something you genuinely need — and is worth avoiding when it does not.
Routes within the category
Six structures we work across.
Private credit & NBFC funding
Non-bank lenders able to underwrite situations, timelines or structures that bank credit processes will not accommodate.
Venture debt
Debt alongside or between equity rounds, typically for businesses with institutional backing, extending runway with limited dilution.
Mezzanine & structured capital
Instruments sitting between senior debt and equity, often with conversion features or participation, shaped to a specific need.
Receivable-backed structures
Capital raised against invoices, contracts or predictable cash flows rather than against the balance sheet as a whole.
Special situations capital
Providers who specifically underwrite complexity — transitions, restructurings and situations conventional lenders decline.
When it fits
Situations where alternative capital is often the better answer.
- The requirement does not map to a standard bank product
- Timelines are shorter than a conventional credit process allows
- The business is growing faster than traditional lending criteria accommodate
- Security is available but in a form banks value conservatively
- Equity is available but the dilution is not acceptable at this valuation
- The situation carries complexity that requires a bespoke structure
How Sourcing India assists
Navigating a fragmented and uneven market.
This is a less standardised market than bank credit, which makes both structuring and counterparty selection materially more important.
01
Situation analysis
Establishing why conventional routes do not fit, and confirming whether that is genuinely the case.
02
Structure design
Shaping an instrument around the actual cash flows, security and timeline rather than forcing a standard product.
03
Provider mapping
Identifying which funds and providers are genuinely active in this structure, sector and size.
04
Preparation
Assembling the case in the form these providers assess, which differs meaningfully from bank documentation.
05
Term evaluation
Comparing offers on their full economics, including conversion features, participation and exit provisions.
06
Coordination
Managing diligence and documentation through to drawdown.
Key considerations
Where care is most needed.
01
Total cost is rarely the coupon
Fees, conversion rights, participation and exit charges can change the effective cost substantially. Model it fully.
02
Counterparty quality varies widely
This market is less uniform than banking. Who you take capital from matters as much as the terms.
03
Structures can constrain later
Conversion features and security packages shape what future funding is possible. Consider the next raise now.
04
Speed has a price
Faster underwriting generally reflects higher risk pricing. That can be entirely worth it — but the trade should be conscious.
05
Documentation is bespoke
Unlike standard bank documentation, these agreements are negotiated. Read them with proper advice.
06
Regulatory context differs
AIFs and non-bank providers operate under different frameworks. Understand what governs your counterparty.
Alternative investment structures can be complex and carry risks that differ from conventional debt or equity. This page is general information, not a recommendation, and independent legal, tax and financial advice should be taken before entering any such arrangement.
Questions
Questions we are asked about this
No, though it is sometimes described that way. Many businesses use it deliberately — venture debt to extend runway without dilution, receivable structures to fund growth without additional security, or private credit to move faster than a bank process permits. It becomes a last resort only when it is used to solve a problem that better funding would have prevented.
Pricing varies too widely by structure, security and situation for a meaningful general figure. What is consistent is that it prices above comparable bank credit, because it is absorbing risk or providing flexibility banks will not. The relevant test is whether that premium buys something you genuinely need.
Debt provided to venture-backed businesses, usually alongside or shortly after an equity round. It extends runway with far less dilution than raising more equity, and typically carries warrants or similar features alongside interest. It suits businesses with institutional backing and a clear path to the next round — it is not a substitute for equity that is not there.
Sometimes. It depends on why. A decline based on product fit, timeline or structural complexity is often addressable through alternative routes. A decline based on underlying financial stress points toward a different conversation — see stressed account funding or debt restructuring.
Related
Explore related solutions
Most funding conversations touch more than one route. These are the ones most often considered alongside this page.
A requirement that does not fit a standard product?
Those are the situations this category exists for. Describe the constraint and we will tell you which structures are worth exploring.