Banks have gotten stingier with lending lately, and Fred Hubler explains that’s exactly the gap private credit is stepping in to fill. He defines private credit as a directly negotiated loan offered by non-bank institutions, not issued or traded on public markets, hence the “private” label.
He explains why a business might choose this route over a bank: beyond banks simply lending less, the relationship between lender and borrower offers flexibility and execution certainty that banks tend not to provide during challenging market conditions. Like any loan, the borrower pays interest, typically at a spread above a floating rate until the principal is repaid, and private debt agreements often include covenants that give the lender extra protection. When structured well, Hubler notes private credit can offer higher yields and lower volatility than options like U.S. high-yield leveraged loans or even investment-grade bonds, with most funds focused on the middle market, big enough to be selective, but small enough to avoid competing directly with banks.
Here’s what makes this interesting: as banks keep pulling back from lending, private credit is quietly becoming one of the more compelling ways to chase better yields without the public market swings.
Continue reading Hubler’s full analysis on Forbes: What’s All The Fuss About Private Credit?.