Private credit refers to debt financing provided by non-bank lenders directly to companies through privately negotiated agreements. These loans are not issued or traded on public markets. It has expanded rapidly as companies seek flexible financing options and investors search for higher yields. Stricter bank regulations and reduced risk appetite since the 2008 financial crisis have also limited traditional lending, creating space for private funds. The term ‘private’ refers to the lender, not the borrower, which can be publicly listed or privately held.
The global private credit market is estimated to be over $3 trillion. Some project it could grow to approximately $5 trillion by 2029. The U.S. private credit market has grown to roughly $1.3 trillion and is positioned for further expansion in 2026. Private credit offers benefits to both borrowers and investors. Businesses often turn to private credit for capital to fund expansion or acquisitions. Institutional investors use private credit as an alternative source of yield, portfolio diversification, and consistent cash flows. Direct lending, where private credit funds make loans directly to companies, is the dominating strategy within private credit.
