New Report: Businesses Increasingly Choose Private Credit for Financing

Washington, D.C. – The American Investment Council (AIC) released a report today, authored by PitchBook, highlighting the growing role of private credit in serving small and middle-market businesses.

“Private credit is playing a crucial role in supporting businesses and delivering impressive returns for investors, especially in uncertain times,” said Drew Maloney, President & CEO of the American Investment Council. “The industry’s resilience and flexibility are filling market gaps and providing customized financing solutions. Private credit has become indispensable for businesses seeking financing, and is increasingly becoming their preferred option.”

The American Investment Council is the premier trade association in Washington for the private credit industry and its members represent two-thirds of all assets under management. 

Key Insights from the Report:

  • Outpacing Non-PE Backed M&A: Private credit is outpacing the broadly syndicated loan market in providing financing for mergers and acquisitions (M&A) that do not have a private equity sponsor, emerging as an important option for firms seeking financing in today’s market. Private credit offers greater certainty with clear terms, interest rates, and timelines.
  • Robust Investment Returns: Private credit remains a strong investment strategy, with returns outperforming other asset classes. North American private credit vintages of 2017 and 2018 are already showing distributed/paid-in multiples exceeding 0.5x, meaning more than half of their total value has already been distributed back to investors. Private credit funds have considerably outperformed the Morningstar high yield index. In 2022 private credit funds had an internal rate of return of 7.59% compared to a return of -3.24 percent for the Morningstar US high yield index.
  • Industry Expansion: Loans from private credit lenders have served as a lifeline to small businesses nationwide, particularly those that cannot qualify for loans from traditional banks or need capital beyond what banks can provide. Since the end of 2021, private credit has funded more non-leveraged buyouts each quarter than syndicates. Sponsors and companies are turning to private credit – a complementary funding source to traditional bank loans – to enhance their fiscal and business situations with flexible, customizable, and sustainable solutions.
  • Continued Growth: Investors recognize the value of private credit and are continuing to commit capital to the asset class. Over the past decade, private credit managers have raised nearly $1.3 trillion. In 2023 alone, private credit managers raised $135.7 billion, well over double the annual total raised one decade ago. Currently, a substantial amount of “dry powder” – approximately $340.8 billion – is available to lend but has yet to be deployed.

The full report and additional case studies can be found here.