Private Credit
Private Credit refers to loans to companies that don't come from a bank, but from funds and other private lenders. The market has grown strongly since the 2008 financial crisis and today also finances data centers for artificial intelligence.
When a company needs money, it traditionally goes to a bank and takes out a loan. But there is a second way: lenders that are not banks lend the money directly. Usually these are funds, meaning companies that pool money from many large investors and invest it together. This type of financing is called Private Credit, roughly “private loan” in German. “Private” here doesn’t mean that private individuals are involved. It means that the loan is not publicly traded on an exchange, but rather agreed directly between two parties.
Why funds today lend what banks used to lend
After the 2008 financial crisis, banks faced significantly stricter rules. They must set aside a lot of their own capital for risky loans. This made certain loans unattractive for banks, for example to mid-sized companies with high debt. Funds jumped into this gap, since these rules don’t apply to them.
What was once a niche market has thus become a giant. Estimates suggest the industry manages over 1.5 trillion US dollars worldwide. Big names include Blackstone, Apollo and Ares. The money comes mainly from pension funds, insurers and sovereign wealth funds. These investors are looking for higher interest rates than they get with government bonds.
This very growth is making regulators nervous. The International Monetary Fund and the Bundesbank regularly warn that no one has a good overview of the market. With bank loans, regulators know fairly precisely who owes whom how much. With Private Credit, the contracts are confidential and the risks are hard to quantify.
How such a loan comes about
A fund first collects commitments from large investors, often amounting to several billion. Then it looks for companies that need money. These are often companies that are just being acquired by a private equity firm. The fund examines the figures, negotiates the interest rate and term, and pays out the money. Terms of five to seven years are typical.
Interest rates are significantly higher than what banks charge. Several percentage points on top of a reference rate are common. In return, the borrower gets money faster and with less bureaucracy. In addition, the terms can be tailored more flexibly, for example if the company only expects profits in a few years.
The decisive difference from a bond: bonds are traded on an exchange, their price is visible daily. A private loan has no market price. The fund estimates its value itself, usually once per quarter. This looks stable, but may hide problems longer than an investor would like.
From data centers to retail investor funds
In business news, Private Credit has recently come up mainly because of artificial intelligence. Data centers for AI cost tens of billions of dollars. Part of these sums now comes from private lenders instead of banks. In 2025, for instance, Meta raised around 27 billion dollars this way for a data center in Louisiana, a large part of it via Blackstone.
Ordinary savers, too, are now coming into contact with it. More and more providers are selling funds that contain private loans in small denominations. Anyone buying into this should know: the money is often not available at short notice. In crises, repayments can be limited.
A common misconception is that Private Credit is automatically riskier than a bank loan. The risk lies not in the legal form, but in the borrower and the price. What’s more critical is the opacity: because losses only become visible with a delay, trouble can build up unnoticed. When you read about “shadow banks” in the news, it’s usually this very market that’s meant.