This article talks about the explosion of private credit within private equity. With banks pulling back from lending, private credit has become the financing of choice for PE-backed companies. The market is projected to reach $2.6 trillion within a few years. What does that mean in practice? More flexibility, faster approvable and capital for deals that banks won’t touch, but also higher costs and tighter covenants.
Private credit is not cheap money for CFOs. The challenge is discipline. I’ve used private credit to fund growth in the past, and the lesson is simple. You need a clear ROI. Borrowing to plug liquidity holes is a trap. Borrowing to fund growth initiatives that pays back in EBITDA multiples is value creation.
What’s our takeaway? Private credit is a powerful tool, but only if used wisely. CFOs must weigh cost against return and structure credit with precision done right. It’s a growth engine. Done wrong, it’s a debt anchor that destroys value.