The Rise of Private Credit
What Forward-Thinking CFOs Need to Know in Today's Market
A strategic guide for CFO recruitment and financial leadership in the evolving lending landscape
Private Credit by the Numbers
Current Global Assets
$1.7 Trillion
Estimated global private credit assets under management
Projected Growth
$3.5 Trillion
Expected global market size by 2028
Bank Lending Share
35%
Bank lending as proportion of corporate borrowing (2023)
Potential IRR
15%
Typical internal rate of return for institutional investors
Market Landscape: Bank vs. Non-Bank Lending
The corporate lending ecosystem has fundamentally shifted with bank lending dropping from 44% in 2020 to 35% in 2023, while non-bank lending has experienced tremendous growth.
Private Equity Influence
An estimated $2.49 trillion in dry powder among PE firms has helped fuel private credit growth
Larger Deal Sizes
Private credit now finances deals of $2 billion and up, expanding beyond traditional markets
Why Forward-Thinking CFOs Consider Private Credit
Customized Deal Structure
Unlike one-size-fits-all bank loans, private credit providers work directly with borrowers to customize terms based on specific needs and risk profiles. Direct lenders can base loans on overall business assets, including goodwill.
Speed and Certainty of Execution
Private credit firms can move quickly without depending on sprawling investment committees. CFOs benefit from quicker decisions and greater certainty of execution compared to traditional lending channels.
Higher Leverage Available
Private credit can offer higher leverage than traditional lending, giving companies more capital to work with for strategic initiatives, acquisitions, or growth opportunities.
Relationship-Based Lending
Private credit funds invest for longer terms (5-7 years) and work closely with borrowers, creating a one-to-one relationship similar to traditional banking relationships but with more flexibility and often better aligned incentives.
How Banks Are Responding to Private Credit
Competitive Strategies
- Building their own funds to complement existing investment banking services
- Creating wealth management products for private credit exposure
- Leveraging existing client relationships to develop direct lending capabilities
Cooperative Strategies
- Creating connections between corporate clients and private credit firms
- Developing units to lend directly to credit funds
- Forming origination partnerships where banks source deals and private credit provides capital
Future Outlook: What CFOs Should Consider
Potential Opportunities
Expanding product offerings: Private lenders may diversify to accommodate a broader array of debt and innovation.
Bank-like features: Addition of revolving lines of credit and other traditional banking products.
Competitive landscape: Intensifying competition could lead to better terms for qualified borrowers.
Potential Risks
Market volatility: Interest rate changes could affect M&A activity and private credit growth.
Default concerns: High-profile defaults could shift investor sentiment toward other asset classes.
Regulatory attention: Growing market size may attract increased regulatory scrutiny.
Implications for CFO Leadership
Strategic Financial Leadership
Modern CFOs must navigate an increasingly complex lending landscape with diverse options beyond traditional bank relationships. Understanding private credit adds a valuable tool to the CFO's financing toolkit.
Relationship Cultivation
Forward-thinking CFOs are developing relationships across the broader financial ecosystem, including private credit providers, to ensure optimal capital access regardless of market conditions.
Risk Management Evolution
Understanding the nuances of private credit terms, covenants, and embedded options requires sophisticated financial acumen and risk management capabilities.
Talent Development Needs
Finance teams now require broader expertise across diverse financing structures, creating demand for professionals with experience beyond traditional banking relationships.
