Private Debt Investor Highlights New Report on How Private Credit Supports Small Businesses & Jobs
Today, Private Debt Investor published an article on the findings from the American Investment Council’s new report, prepared by EY, on the significant impact of private credit on the U.S. economy. The report by AIC, whose members account for two-thirds of the private credit assets in the U.S., highlights the industry’s role as a critical source of financing for small and medium sized businesses. Private credit was responsible for adding 1.6 million jobs to the economy, and those jobs provided $137 billion of wages and benefits while adding $224 billion toward GDP.
In an interview, AIC President and CEO Drew Maloney said:
- “There is a lot more getting written about private credit but there is a lack of understanding about how private credit works. AIC is working to get ahead of that curve.”
Read the full article below and the full report here.
EY report outlines economic benefits of private credit
Private Debt Investor
By Christopher Faille
October 11, 2023
The asset class was responsible for adding 1.6m jobs and $137bn in wages and benefits to the US economy in 2022, according to the report.
A recent report, released by the American Investment Council and prepared by Ernst & Young, highlights the contributions of private credit activity to the broader US economy, including the industry’s role as a source of financing for small and medium sized businesses and its impact on wage and job creation.
Specifically, the report found that in 2022, private credit contributed 1.6 million jobs to the US economy, and that those jobs provided $137 billion of wages and benefits while adding $224 billion toward GDP.
Investments made by public and private pension funds constitute approximately 31 percent of private credit funds’ total assets, the report also notes.
Drew Maloney, president and chief executive of the AIC, said in a statement that after the global financial crisis, “many small businesses found it harder to gain access to the capital they need to grow and succeed.” Private credit grew by filling that void.
In determining economic impact, the AIC and EY analyzed more than 4,000 private credit deals, worth approximately $500 billion, that were active in 2022. These deals involved more than 3,6000 US businesses comprising roughly 2.8 million employees.
The AIC, whose members account for two-thirds of the private credit assets in the US, worked with EY on this report as part of public outreach efforts. In an interview, Maloney said, “There is a lot more getting written about private credit but there is a lack of understanding about how private credit works. AIC is working to get ahead of that curve.”
The AIC estimate of the employment contributions of private credit has consequences both for the firms that borrow from private credit and those for suppliers to those companies and related consumer spending.
In a 2021 survey by the National Bureau of Economic Research, private credit providers identified the top reasons that companies come to them for loans. The most common answer: certainty and speed. Also rating high in this survey was the leverage available – private firms will offer more than a bank would support, as well as flexibility as to the covenants.