The private credit industry offers nonbank loans directly to businesses, particularly privately held midmarket companies. A variety of institutions house private credit funds, from private equity firms to insurance companies. As of early 2025, the global private credit market was estimated to be worth roughly $3T.
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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.
Similar to private equity, private credit is part of the private markets world. Both strategies offer illiquid, privately negotiated investments for privately held companies. Unlike private equity investors, however, private credit investors typically do not take ownership stakes in the companies they invest in.
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.
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).
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.
This raised red flags about the state of the private credit market at large. However, experts have cautioned that the idea that private credit is on the verge of collapse is overstated.
While Blackstone is the world's largest alternative asset manager, Apollo Global Management is a large private equity firm. Apollo had $480B in private credit assets under management as of January 2025.
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.
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.
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.
The United States is home to more than 33 million businesses, the vast majority of which are small businesses, with millions being created (and others closing shop) every year. These businesses often rely on loans, provide the goods and services that keep the economy flowing, and sometimes even grow large enough to enter public markets or provide private investment opportunities. Explore key topics central to business and finance, from the role of the Federal Reserve to how initial public offerings work, how millions of American students finance higher education, and more.