Private credit is on track to cross $2 trillion in 2026. The reason is not simply bank retrenchment — it is a structural change in how risk is priced, held, and managed across the corporate financing ecosystem.
Traditional banks, burdened by regulatory capital requirements and the legacy of stress testing frameworks, have systematically retreated from middle-market lending. The vacuum has been filled by private credit funds, business development companies, and direct lending platforms that operate outside the constraints of Basel III.
The structural shift is visible in several dimensions. First, the average loan size in the middle market has grown as private credit funds deploy larger tickets. Second, covenant-lite structures have become the norm, transferring more risk to lenders. Third, the secondary market for private credit is maturing, creating liquidity that did not exist a decade ago.
Implications for corporate borrowers
For investment-grade companies, the shift is largely positive — more competition, faster execution, and greater flexibility in covenant structures. For companies with weaker credit profiles, the shift creates a different reality: higher pricing, tighter documentation, and fewer options when things go wrong.
The question is no longer whether private credit will continue to grow, but whether traditional banks can reinvent themselves as co-lenders and portfolio managers rather than origination-and-hold institutions.
At IIG, we advise both borrowers and lenders on navigating this new landscape. Our debt syndication practice sits at the intersection of private credit and traditional banking, helping clients access the right capital structure for their specific needs.