Singapore-based growth financing platform Choco Up has launched a US$30 million private credit facility in partnership with CHUAN, a tech-driven credit specialist focused on the digital economy, to put faster, more reliable working capital in the hands of SMEs across Asia Pacific.
The first drawdown has already been completed, a signal that, at least for now, the market appetite is real.
Also Read: Understanding private credit: Filling the gaps left by banks
The funding gap nobody is solving fast enough
For all the noise about Asia’s startup boom and venture capital frenzy, the region’s backbone — its tens of millions of SMEs — remains chronically underfunded. Banks demand collateral, long operating histories, and months of paperwork. The result is a structural mismatch between when SMEs need money and when they can actually get it.
This is not simply a capital availability problem. It is a timing problem. A manufacturer that has shipped goods but is waiting 90 days for payment cannot afford to wait six months for a bank loan to be approved. A digital commerce seller facing a seasonal demand spike needs funding decisions measured in hours, not quarters.
At the same time, investor appetite has historically skewed towards startups rather than SMEs, and with good reason, from a returns perspective. Startups offer the possibility of exponential growth, equity upside, and portfolio-defining outcomes. SMEs, by contrast, tend to grow linearly, generate steady but unspectacular returns, and offer little of the asymmetric payoff that venture investors seek.
The result is a two-tier capital market where high-risk, high-reward bets attract institutional attention while profitable, established small businesses are left to scrape together funding from overdrafts, trade credit, government grants, and family networks.
Private credit is increasingly positioned as the answer to this structural gap, but understanding what it actually offers and where it falls short matters.
What private credit can and cannot do for SMEs
Private credit refers to lending provided outside of traditional banking and public debt markets, typically from institutional investors such as asset managers, family offices, credit funds, and insurance companies. For SMEs, it can offer a meaningful alternative when banks won’t lend quickly enough, or at all.
The advantages are real. Private credit facilities can move significantly faster than conventional bank loans, with approval timelines collapsing from months to days or even hours when real-time data powers underwriting. Facilities are often structured with greater flexibility than rigid bank products, with repayment tied to business performance rather than fixed schedules.
Also Read: Choco Up, Wonder Capital join forces to launch US$50M private credit funds for APAC SMEs
Crucially, unlike equity financing, private credit does not dilute founders’ ownership stakes, a significant consideration for SME owners who have spent years building their businesses and have no interest in giving away a slice of them.
Choco Up’s partnership with CHUAN leans into these strengths. By combining CHUAN’s access to institutional capital with Choco Up’s AI-driven credit assessment, which draws on real-time business performance data, the facility promises funding approvals in as little as a few hours. Capital providers, meanwhile, gain near real-time visibility into the underlying asset performance, a level of transparency that has historically been absent from SME lending.
“SMEs today don’t just need access to capital. They need financing that keeps pace with how their businesses operate,” said Percy Hung, CEO and founder of Choco Up.
But private credit is not without its complications. The cost of capital is typically higher than a bank loan, reflecting the risk premium demanded by non-bank lenders operating in a less regulated space. SMEs that rely too heavily on private credit facilities without a clear path to profitability can find themselves in a cycle of rolling debt at increasingly punishing rates. Transparency on fees and terms can also vary significantly between providers, leaving less sophisticated borrowers exposed.
The governance and oversight frameworks around private credit markets in Asia are also still developing. Unlike bank lending, which is heavily regulated across the region’s major jurisdictions, private credit operates with considerably more latitude, which cuts both ways. For nimble operators, it is a feature. For borrowers who do not fully understand the terms they are signing, it can become a liability.
Private credit versus venture debt: not the same animal
It is worth drawing a clear distinction between private credit and venture debt, two instruments that are sometimes conflated but serve very different purposes.
Venture debt is designed specifically for startups, typically those that have already raised equity funding from venture capital investors. It is structured as a complement to equity rounds, providing additional runway without further dilution. Lenders price venture debt on the assumption that the borrower has VC backing as a credibility signal, and deals often include warrant coverage, the right to buy equity at a fixed price, as additional compensation for the lender’s risk.
Private credit, as deployed through the Choco Up-CHUAN facility, is aimed squarely at operating businesses with real revenue, not high-burn startups chasing growth at any cost. The underwriting is based on demonstrated business performance: cash flows, transaction data, and operational metrics, not the identity of a startup’s investors or the promise of a future funding round. The repayment structure reflects this too, with facilities designed to align with how a business actually generates and collects cash.
For Lin Tun, founding partner and chief investment officer of CHUAN, the institutional opportunity here extends beyond any single market. “This partnership is central to CHUAN’s strategy of curating a network of proven tech partners, providing global investors with access to diversified credit assets with attractive yields that have largely been untapped by the capital markets,” he said.
A platform play with regional ambitions
Choco Up brings more than technology to the table. The company claims to have enabled over US$1 billion in gross merchandise value across its portfolio, giving it a meaningful track record in flexible, equity-free financing across Southeast Asia and beyond. CHUAN provides capital markets infrastructure for aggregating and distributing credit assets at scale, alongside a global investor network.
Also Read: Choco Up, Set Sail AI forge partnership to help businesses grow through Gen AI adoption
The combined pitch to institutional investors is essentially this: SME credit in Asia, structured with the kind of data transparency and underwriting rigour that have historically been reserved for larger corporate borrowers, is now accessible as a diversified, relatively short-duration asset class.
Whether that pitch translates into sustained capital deployment at scale will depend on whether the technology infrastructure can withstand stress — and whether SMEs across the region can access the facility on terms that genuinely help rather than merely substitute one form of financial pressure for another. For Asia’s US$2.5 trillion funding gap, a US$30 million facility is a start. It is a long way from a solution.
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Source:
e27.co
