Private credit has emerged as one of the most dynamic and fastest-growing segments of the alternative financing market. With over $1.5 trillion in assets under management globally, private credit funds have become essential capital providers for middle-market companies that fall outside the scope of traditional bank lending or public capital markets.
Unlike syndicated loans or public bonds, private credit involves direct, bilateral relationships between specialized lenders and borrowers. This structure offers companies greater flexibility, speed, and certainty of execution—critical advantages in today's competitive business environment.
What is Private Credit?
Private credit refers to debt financing provided by non-bank institutions—primarily private credit funds, direct lenders, and alternative asset managers. These lenders originate and hold loans on their balance sheets rather than syndicating them to broader markets.
Key Characteristics
Direct Relationships
Bilateral negotiation with single lender
Held-to-Maturity
Lender holds loan on balance sheet
Flexible Structures
Customized terms and covenants
Certainty of Execution
No syndication or market risk
Market Overview
$1.5T+
Global AUM
Total assets under management in private credit globally
40%
Market Share
Middle-market LBO financing from direct lenders
15%
CAGR Growth
Expected annual growth through 2027
Types of Private Credit
| Strategy | Description | Typical Use | Leverage |
|---|---|---|---|
| Direct Lending | Senior secured loans to middle-market companies | Sponsored buyouts, growth capital | 4-6x EBITDA |
| Unitranche | Single-tranche debt combining senior and mezzanine | Simplified capital structure | 4-7x EBITDA |
| Mezzanine | Subordinated debt with equity participation | Growth capital, acquisitions | 2-3x EBITDA |
| Specialty Finance | Asset-based, equipment, or real estate lending | Working capital, specific assets | Varies by asset |
| Distressed Debt | Financing for stressed or restructuring companies | Turnarounds, refinancing | Varies widely |
Advantages of Private Credit
For Borrowers
- Faster execution (4-8 weeks vs. 12+ weeks)
- Flexible covenant structures
- Certainty of close (no syndication risk)
- Relationship-based approach
- Confidentiality (no public disclosure)
For Lenders
- Higher yields vs. public markets
- Floating rate protection
- Control over covenant package
- Direct borrower relationship
- Lower default correlation
Typical Terms & Pricing
Pricing Range
- Senior Direct Lending:S + 550-750 bps
- Unitranche:S + 650-850 bps
- Mezzanine:12-16% cash + PIK
Structural Terms
- Tenor:5-7 years
- Amortization:0-25% per year
- Call Protection:2-3 years soft call
*S = Secured Overnight Financing Rate (SOFR). Pricing as of Q4 2025. Terms vary by credit quality, industry, and transaction specifics.
Related Insights
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Market IntelligenceThe $1.5T Private Credit Revolution
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