Private credit has, over the past five years, become a significant source of mid-market financing in Europe. For borrowers, the appeal has been straightforward. More flexible structures than traditional bank lending. Faster execution. Solutions tailored to situations where syndicated bank facilities would not fit. For companies in transition — post-deal integrations, carve-outs, mid-cycle stress — it has been useful capital.
There is, however, a misreading we encounter regularly. Private credit is sometimes treated as the patient cousin of bank lending: same product, gentler on the borrower, more willing to wait. The 2026 evidence does not support that reading. The product is different, the discipline it requires from the borrower is sharper, and the misreading shows up exactly when the company would most prefer it did not.
1. The product is structurally less patient
The Financial Stability Board's May 2026 review of private credit estimates the global market at between 1.5 and 2.0 trillion dollars, with a substantial share of exposures concentrated in mid-sized leveraged borrowers. The same review highlights opacity, leverage and liquidity mismatches as systemic concerns, and notes growing interconnection with banks, insurers and private equity. S&P Global, separately, warns that European private credit performance in 2026 is being tempered by elevated global risk.
What this means at the borrower level is straightforward. The lender is operating with shorter feedback loops, less visibility on peers in the same portfolio, and a sharper need for verifiable information. The structures that look flexible at origination — covenant-lite features, longer tenors, bullet repayments — are flexible inside a defined envelope of operating performance. When the envelope is approached, the relationship behaves with less elasticity, not more.
2. The waiver is a request for verifiability, not for time
Mid-market borrowers under traditional bank relationships could rely, at the margin, on the patience of a long bilateral history. The bank had visibility on adjacent borrowers, on regional performance, on cycle behaviour. Private credit lenders typically do not have that surrounding context. What they have instead is data — on cash, on covenant headroom, on operational variances, on management cadence.
When pressure surfaces, the conversation is reshaped accordingly. The lender is not extending an old relationship; it is re-pricing risk on the basis of what the company can document and demonstrate. Amend and extend is available, but on terms calibrated to the cleanliness of the reporting and the credibility of the governance the borrower can show. The borrower who walks in expecting flexibility on the strength of the relationship gets terms shaped by the absence of that strength.
3. The optionality is asymmetric
The third feature of the cycle is the asymmetry between origination and stress. At origination, the borrower has options: multiple lenders compete for the deal, and structures can be negotiated. Under stress, the options compress quickly. The exposure is held by a smaller group of lenders, the secondary market for distressed paper is concentrated, and the original syndication does not reproduce itself in the workout. The borrower's negotiating posture rests largely on what the operating evidence shows, not on the breadth of its lender base.
This is observable in the way restructuring conversations evolve. In bank-led situations, the lender may absorb part of the friction through forbearance, restructuring desks, and longer reporting cycles. In private-credit-led situations, the friction is pushed back to the borrower in the form of tighter information rights, more aggressive cash sweep mechanics, and faster scrutiny of management decisions. Both can produce a viable workout. The shapes of the two paths are different, and the company that prepares for one when financed by the other arrives badly.
What this implies for the borrower
Companies that draw on private credit operate well in the cycle when they treat the structure as the discipline it is, not as a softer version of a bank. Reporting is built to lender cadence from origination, not bolted on under stress. Cash visibility is independent of management commentary. Covenant headroom is monitored in real time, not at quarter close. The relationship with the lender is treated as a working relationship, not as a financing transaction concluded at signing.
When these are in place, private credit delivers what it was designed to deliver: capital structured around the company's actual situation, in a partnership the lender is equipped to maintain. When they are not, the same capital that looked flexible at origination becomes a structure that prices every weakness, on the cycle, at the moment the company can least afford it.
Private credit is a serious tool. It is not a patient one.
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References
- Report on Vulnerabilities in Private Credit, Financial Stability Board, May 2026.
- Private Credit Outlook in Europe Tempered by Rising Global Risks, S&P Global Market Intelligence, March 2026.
- Independent Business Review (IBR), Deutscher AnwaltSpiegel, July 2025.