Private credit is replacing traditional bank financing in some cases for major construction projects, with Meta’s multi-billion-dollar data center marking the largest deal on record.
The intertwined nature of modern construction finance means problems in private credit markets can ripple through the broader financial system.
A fundamental shift in construction financing is unfolding, as private credit markets increasingly replace traditional bank lending for major projects.
Meta’s recent $30 billion financing package for a Louisiana data center megaproject is the largest private capital investment on record, according to Fortune. The tech company bypassed traditional bank loans, instead securing funding from private lenders outside the regulated banking system.
The Meta deal is not an outlier either, it is one indicator of a growing trend in how construction projects access capital.
For construction professionals, this shift introduces both challenges and opportunities. Projects which need non-traditional or quick financing, essentially a loan not from a traditional institution, are increasing, tapping this growing stream of capital.
These loans, however, come with tradeoffs that affect everyone in the industry from general contractors to building product manufacturers.
Private creditors raise funds to offer capital to construction projects. Their appeal over traditional bank financing is their speed and flexibility. Waiting for bank approvals with rigid terms can cause bid or project delays.
Private lenders have the ability to move much quicker with more tailored loan conditions. Traditional banks face regulatory requirements which can slow down the lending process.
Private creditors operate under looser regulations, allowing them to tailor loans to individual firms or projects’ needs and move quickly on lending decisions. This timeliness and flexibility have made private capital especially attractive for large-scale infrastructure, industrial facilities, and particularly data centers.
According to JLL, debt funds most data center development, but traditional banks have become pickier about which projects they'll finance. Private lenders have increasingly filled the gap, backing projects like Meta's Louisiana data center.
Private credit loans typically have higher interest rates than traditional bank financing. This premium reflects the elevated risk lenders take when operating with less regulatory oversight.
When project owners face higher financing costs, those pressures often translate into tighter project margins throughout the construction process.
The growth of private credit also has effects on the broader financial system through its interconnectivity. According to Moody's, banks have lent nearly $300 billion to private credit providers, with total loans to non-depository financial institutions reaching $1.2 trillion as of June 2025.
These loans now comprise 10.4% of US banks' total loans, nearly three times the 3.6% of a decade ago. Bank's growing exposure to this market means poor lending practices in private credit could cause systemic repercussions should they go bad.
The construction industry is seeing the beginnings of a project financing transformation. Private credit will likely continue filling gaps left by selective traditional lenders, especially for large-scale projects.
The mingling between banks and private credit adds complexity to the landscape. Traditional banks finance the private lenders who then fund construction projects, which can spread financial stress further through the economy if poor loans go bad.
Construction professionals should stay informed on project financing dynamics as private credit becomes more common in the industry. As alternative financing structures become an increasingly important part of industry knowledge, informed professionals may better navigate the construction finance landscape.
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