Why Private Credit Is One of the Smartest Investments You’re Not Making

When it comes to investing, what comes to mind? In most cases, stocks and bonds are the first thing that comes to mind. As a gold standard for asset allocation, Wall Street advisors recommend the old “60/40 split” in which 60% of investments are in stocks, 40% in bonds.

But here’s the problem: if you’re only investing in public markets, you’re not getting access to 99.9% of businesses.

Today, there are only about 4,000 publicly traded companies in the U.S. Compared to a couple of decades ago, that number has actually declined. Meanwhile, there are tens of millions of private businesses in the U.S. — and more than 100 million worldwide.

By limiting yourself to only stock purchases, you’re missing out on less than 1% of the opportunity set. This is just a small sample of what’s available.

That’s where private credit comes in — and one of the reasons I love it so much.

One of the leading experts in this area is Peter Sack, co-founder and partner of Chicago Atlantic. Chicago Atlantic has also invested in venture debt, digital infrastructure, lower-middle-market lending, and cannabis private credit. Their success shows that this asset class can be powerful when executed properly.

What Is Private Credit?

Essentially, private credit is lending to businesses that cannot or won’t access bank financing. Unlike a public bond traded on an exchange, private credit is a loan agreement between investors and companies.

There’s nothing new about this. People have been making loans for as long as trade has existed — back when we exchanged shells and shekels. However, what makes the industry different today is its scale and sophistication.

Since the 2008 financial crisis and the implementation of the Dodd-Frank Act, many banks have stopped lending to small and medium-sized businesses. In response, private lenders stepped in to fill the gap, including asset managers, family offices, and individual investors.

It’s a huge gap. Our economy relies heavily on private businesses. To grow, expand, and compete, they need capital. With customized terms, private credit investors like Chicago Atlantic can step in when banks don’t provide it.

Why the Wealthiest Families Invest 5–15% in Private Credit

When I’m building a portfolio, I ask: What are the wealthiest families in the world doing?

In general, ultra-wealthy families allocate 5% to 15% of their portfolios to private credit.

Why? It offers a unique combination of:

• Attractive returns. Often similar to equity but without equity-level risks.
• Downside protection. Negotiated terms, collateral, and covenants enabled this deal to be made.
• Diversification. Exposure to businesses outside of the public market.

It’s no wonder that firms like Chicago Atlantic are seeing such strong demand from family offices and institutional investors. They have designed portfolios that provide wealthy families with reliable yields, strong protections, and access to overlooked sectors.

How Private Credit Creates Opportunity

Private credit thrives on its flexibility. Unlike banks, which are limited by regulation, private lenders can offer terms that meet a business’s needs while protecting investors.

Peter and his team are masters at this. In addition to their loans, they often structure deals with equity kickers, which are bonus equity positions or warrants.

In other words, when a company succeeds, investors not only earn interest but also have the potential for upside profit. In the long run, those equity kickers can compound into a powerful portfolio boost.

This is a reminder that private credit isn’t just about lending — it’s about negotiating smarter, more dynamic deals than banks ever could.

The Cannabis Lending Example: A High-Return Niche

Cannabis has been one of the most interesting niches in private credit.

Despite cannabis being legal in dozens of states, federal restrictions remain. The result is that banks won’t lend to cannabis businesses, even if they’re cash-flow positive and asset-backed.

As a result of state legalities and federal illegalities, cannabis businesses need capital, but few institutions are willing to provide it.

With over $2 billion in cannabis private credit deployed, Chicago Atlantic has become one of the largest lenders in this space. Because there is little competition, they can offer strong protections and low-risk structures.

It’s a textbook example of how private credit thrives where traditional finance cannot — and why experts like Peter believe this will be a growth area for years to come.

Beyond Cannabis: Other Sectors Where Private Credit Shines

It’s not just cannabis that’s delivering strong returns on private credit. Other opportunities include:

• Lower middle-market companies. Banks and private equity firms often overlook businesses with EBITDA below $10 million. Firms like Chicago Atlantic serve this underserved market.
• Recurring revenue businesses. Even though GAAP profitability looks weak, these companies’ subscription-based revenue streams make them highly attractive to lenders.
• Digital infrastructure and mining. In industries that require significant capital investment, such as blockchain infrastructure, creative financing is essential. Here, Peter and his team were early movers.
• Venture debt opportunities. Since interest rates have been rising, traditional venture debt has dried up, leaving a void for private lenders who understand how to structure deals with investor protections.

Throughout these niches, the same theme emerges: private credit thrives when investors like Peter can identify supply-demand mismatches and design structures that are mutually beneficial.

Why Private Credit Offers Better Downside Protection

There are several reasons I like private credit, but I particularly appreciate its downside protection.

When a company struggles, equity investors are often last in line. But when it comes to private credit, you’re the lender. To ensure your position, you can:

• First-lien debt. It’s you who gets paid back first.
• Collateral. Hard assets back your loan.
• Covenants. If the borrower slips, protective terms will apply.

Chicago Atlantic heavily uses this playbook. Peter often emphasizes that their focus isn’t just on yield, but also on risk-adjusted yield. With strong protections and equity kickers, they participate in upside while remaining insulated from downside.

Taking Credit Public

In recent years, private credit funds have gone public. As a result, Chicago Atlantic launched a business development company (BDC) under the ticker LIEN and a real estate investment trust under the ticker REFI.

By doing so, the stock market introduced private credit to everyday investors rather than just institutions. This is part of Peter’s broader mission to expand access to an asset class that has traditionally been closed to the general public.

Final Thoughts: Why You Should Pay Attention to Private Credit

The private credit market isn’t a fad. Historically, it has been one of the oldest forms of finance in the world, revitalized for the modern era.

The reason for its existence is that banks are constrained, private businesses are thirsty for capital, and investors seek better returns.

For this reason, 5–15% of the world’s wealthiest families allocate their portfolios to these investments.

Peter Sack and Chicago Atlantic are demonstrating how private credit can be powerful when done with discipline, creativity, and a focus on downside protection and upside potential. Following that lead is important to me as a Lifestyle Investor. As a means of diversification, cash flow generation, and downside protection, private credit offers opportunities that most people are unaware of.

You are playing with less than 1% of the available options if you invest only in public equities. Now is the time to expand your horizons and start learning more about private credit.

Key Takeaways

• The public markets are shrinking. The U.S. has fewer than 4,000 publicly traded companies, which means investors are missing 99% of the business opportunities in the global economy.
• Private credit fills a massive funding gap. In many cases, small and midsized businesses cannot access traditional bank financing; therefore, alternative lending is a prime option for them.
• Chicago Atlantic is a leader in the space. Through Peter’s guidance, the firm has deployed over $2 billion in cannabis private credit and is expanding into venture debt, infrastructure, and other areas of expertise.
• Attractive yields with strong downside protection. Secured by collateral, private credit often generates higher returns than traditional bonds.
• Cannabis lending is a prime example. Federal banking restrictions force cannabis operators to turn to private lenders, creating a lucrative, underserved market.
• Diversification is key. By diversifying exposure across industries (including digital infrastructure and lower middle-market lending), we reduce risk and maximize upside.
• Private credit is becoming mainstream. What was once a niche asset class is now becoming a staple in sophisticated portfolios thanks to experts like Peter and firms like Chicago Atlantic.

Featured Image Credit: Karola G; Pexels: Thank you!