Private credit is a nonbank loan made directly to a business

Private credit and private equity are both alternative assets

Like private equity fund managers, private credit managers typically raise funds directly from investors, lending to corporations. The borrowers can benefit from the lack of middlemen and resulting efficiency, and the lenders often yield comparatively higher returns.

Direct lending is the most common form of private credit

Other types include opportunistic credit, special-situations credit, mezzanine finance, venture debt, infrastructure debt, real estate debt, and more. All of these sources of capital technically create private transactions, so they can all call themselves private credit.

Why private credit is attractive to both businesses and investors

While investors are attracted to the high rates, private credit is particularly attractive to mid-sized businesses that are too small for bank syndication and want faster, more flexible financing options.

Private credit grew from a $250B asset class in 2010 to around $1.5T in early 2024

That's partly due to the industry's rising interest rates that created more upside for investors. Interest rates have increased in recent years alongside the Federal Reserve's interest rate hikes beginning in 2022. Private credit loans typically stretch over multiple years (typically between five and seven years, although term lengths vary).

Retail investors cannot directly invest in private credit funds—but other financial vehicles can offer exposure to the industry

For example, as some US regulations have loosened in recent years, retail investors have begun to get exposure to the private credit market via ETFs that invest in publicly traded financial vehicles with private credit exposure, such as BDCs.

Why private credit has faced challenges in recent years

The factors that some experts say are driving what could be private credit's most challenging era since the 2008 financial crisis include global economic uncertainty around trade and tariffs, investor fears about the amount of money being spent on artificial intelligence, and more.

Some private credit funds trade on the stock market

These funds, which trade at market prices, are called "public BDCs," which stands for "business development companies." For instance, the global alternative investment manager Ares Management Corp. has a public BDC.

Before the modern banking system, most lending resembled private credit

Before the creation of the modern banking system, the majority of loans were negotiated directly between the lender and the borrower—effectively making them private credit transactions.

The basics of private credit—plus why it matters in 2026

This podcast episode—one of the best we found for explaining the ins and outs of private credit—details how private credit became a significant lender for the tech industry, and how AI could disrupt private credit investments.

Explore the differences between private equity, venture capital, and hedge funds

Private equity firms focus on buying and improving private companies with the intent to sell them for profit or take them public. Venture capital is technically a form of private equity in which investors focus on startups and generally don't seek majority control of the company. Hedge funds are pooled investments for sophisticated investors that pursue a wide range of often complex strategies.

Private equity firms often use leveraged buyouts to acquire new companies

In a leveraged buyout or "LBO," private equity funds finance acquisitions with debt secured by the target company's assets and cash flows. The PE firm aims to improve operations and leverage the company's profile to pay down debt, thereby increasing equity value.

Investing in private equity is typically reserved for 'accredited investors'

Limiting PE to accredited investors helps protect less experienced investors from large and risky investments. Accredited investors must meet requirements set by the Securities and Exchange Commission—they're typically required to have a net worth exceeding $1M, for instance. (Some users may experience a paywall.)

What are business credit scores?

Businesses have credit scores the same way individuals do—with a few key differences. For one thing, business credit scores range from 0 to 100 instead of 300 to 850, and are based on factors such as bankruptcy and bill-paying habits.

Private companies are often harder to value than public companies

That's partly because there isn't readily available stock information, and financial accounting is kept behind closed doors. Typically, determining the value of a private company involves, among other things, closely comparing the private company with its competitors.

Credit unions, explained

Proponents of credit unions often point to the fact they’re not-for-profit cooperatives instead of for-profit businesses as a key selling point. This explainer dives into what this looks like in action—instead of pocketing the profits from interest rates, credit unions reinvest that money into the products and services they offer. For customers, this tends to create a more personal and community-oriented experience.

Private mortgage insurance protects the lender rather than the borrower

Also known as a “PMI,” private mortgage insurance may be required for those who have a conventional loan and put less than 20% down on their home. A PMI could also be required for someone refinancing their mortgage if they have less than 20% equity remaining in the property.

Special-purpose acquisition companies let companies skirt the IPO process

A video explains how private companies have taken advantage of this loophole, why investing in these companies isn’t always a good idea, and how blank-check companies (as they’re commonly called) work.

The shadow banking system is a group of intermediaries that operate outside of normal banking regulations

The nonbank financial intermediaries that make up the shadow banking system legally provide services that are similar to those of traditional commercial banks. Although the term isn't used as often as it once was, private credit firms are technically part of the shadow banking system, as are hedge funds, payday lenders, buy now, pay later companies, and more.

'Payment in kind' is a compensation method that uses alternatives to cash

Companies can make payments using goods, services, or additional securities instead of cash, helping companies preserve their cash flow. Public BDCs receive roughly 8% of their investment income via PIK.

Venture capital is a form of funding provided to early-stage companies with high growth potential, typically in exchange for an equity (or ownership) stake

For-profit schools are not beholden to educational missions

While many private schools are nonprofit organizations, beholden to their missions and boards, some are for-profit entities owned by private individuals or corporations. In some cases, these institutions offer substandard courses and award unaccredited degrees.

Convertible notes represent loans that startups owe investors

In the second part of a two-part series, convertible notes are explained to be a tool angel investors use to ensure they see a return on their investment in a startup.

Affirm's COO recently said that the company believes the credit card is 'going the way of the VHS tape'

Some people use buy now, pay later apps as an alternative to credit cards. BNPL services have a lower barrier to entry than credit cards—many frequent BNPL users have low credit scores.

The national debt consists of public debt and intragovernmental debt

The national debt consists of money owed to private investors who have purchased Treasury securities and money owed by one sector of the government to another. They’re respectively called public debt and intragovernmental debt.

An initial public offering or 'IPO' is the process of a private company becoming public by putting shares of the company on the stock market for purchase.

Permanent life insurance offers access to a cash value account, which is like a savings account

It's a huge perk of purchasing permanent life insurance. Policyholders often use these accounts as another investment tool. In this podcast episode, NerdWallet experts break down how you can use your cash value account to invest, plus the pros and cons of this tactic.

Palantir's services allow both companies and the government to analyze complex data

There's a common misconception that Palantir buys, sells, and shares data, but Palantir insists it isn't a data broker. Rather, Palantir is more like a data analytics company that allows corporations and government agencies to combine messy, large, and often hard to access datasets to gather insights.

Hedge funds, the private investment firms that trade a wide swath of financial assets, make money by imposing steep fees on investors and from the fund's investment performance.

US consumers collectively owe more than $1T to credit card companies—almost as much as they owe in auto loans.

Memecoins are a type of cryptocurrency—a form of digital currency with a wide variety of uses—created around popular 'memes,' or viral internet jokes.

The first steps to rebuilding your credit score include getting to know exactly what's on your credit report and figuring out how far you are from the '700 club,' or 'good score' range.

Netflix profits when you're not watching, and its movies are designed that way—read a detail-rich critical essay exposing lesser-known Netflix takes

Warren Buffett's former professor Benjamin Graham is known as the 'father of value investing,' a strategy in which investors seek to buy stocks trading below their intrinsic worth.

In 2025, four executives from large tech companies were given positions in the US Army Reserves—including Palantir Chief Technology Officer Shyam Sankar, which reinforced Palantir's ties with the US military and its role as a leading defense partner.

Art theft is the third-largest source of criminal revenues worldwide, thanks in part to the subjective nature of valuing a work of art.

Read a deep dive on the 'all-purpose healing' peptide BPC-157.

Some coin denominations have ridges etched on their sides, partly to prevent counterfeiting, in a practice called 'reeding.'

Corals are themselves not coral reefs—the term refers to the tiny marine invertebrates that build the rigid reef.

The idea for the Federal Reserve was conceived in secret in 1910—with bankers donning duck hunt gear for disguise while traveling to a remote country club on Georgia's Jekyll Island

Pure water does not conduct electricity because this flow of energy requires the movement of charged particles, and water is a neutral molecule.

A Yale student wrote a profound essay about the consulting industry's influence on elite college students that was published in a book of her writing after she died in a post-graduation car accident.

When you complete a CAPTCHA on a website to prove you are human, you may be unknowingly training algorithms for self-driving cars, whose systems require training data to help identify crosswalks, bicycles, and other outdoor objects.

The price of gas is a composite made up of several different factors, with the federal gas tax making up less than 20% of what drivers pay at the pump.

The syncytiotrophoblast is the outer layer of the placenta and the largest human cell, spanning an area about twice that of a king-sized bedsheet.

Power lines are dotted with large, brightly colored balls to improve the visibility of these thin wires to helicopters and small planes and help prevent potential crashes.

Domino's Pizza's 30-minute delivery guarantee was responsible for the chain's 1980s surge, but it was discontinued after the company was found liable for delivery driver accidents.

Doctors differentiate between a phobia and fear by asking patients whether their fear interferes with their day-to-day activities.

Objects can be 3D printed with light by projecting 2D computerized tomography (CT) scans onto rotating cylinders of resin, which solidify upon exposure.

Ebola is a filovirus, meaning it resembles a thread under a microscope, though it sometimes twists and can resemble a bowl of spaghetti.

Prince's sexually explicit 1984 track 'Darling Nikki' attracted the ire of the Parents Music Resource Center, an advocacy group that inspired the Parental Advisory sticker, even though the song ends with a Christian message.