Mike Crockart, Lib Dem MP for Edinburgh West and a member of the Business, Innovation and Skills Committee, highlighted the benefits of such providers at a fringe event on for-profit education during the party conference in Brighton.
The event on 23 September was hosted by the University and College Union, Liberal Youth and the National Union of Students, and was chaired by Times Higher Education.
Saying he was playing "devil's advocate", Mr Crockart argued that for-profits could potentially be "more responsive to student and employer needs" and help pioneer new technology. It was wrong to say that all the providers were "driven by greed", he added, arguing that for-profits were "here to stay".
During a heated question-and-answer session with the audience, the MP said Lib Dems should not oppose for-profits (they were "inevitable"), but instead should focus on ensuring that they were "regulated properly".
That brought angry responses from some Lib Dem delegates and a warning from Sally Hunt, the UCU general secretary, another member of the event's panel.
The Lib Dems risked being "right back where we were at the beginning of the fees debate", she said.
Tom Wood, chair of Liberal Youth, said he thought it was "fundamentally impossible" for for-profits to widen participation while pursuing profit.
Baroness Brinton of Kenardington, chair of the Lib Dem policy working group on post-16 education, said it would look at for-profits "briefly". The peer told THE: "As a party...we've never been in either the Conservative camp, where one might say private is king, or Labour, where private [was] a dirty word...What we want is a high-quality offer that everybody can access."