Private Credit: The New Way Businesses Borrow

No matter how small or large a business is, it needs capital to cover daily operational expenses, manage inventory, fund expansion plans, invest in equipment and technology, and cover unexpected expenses to maintain stability, fuel growth, and seize new opportunities.

Traditionally, businesses relied heavily on financial institutions for loans, but in recent years, these lenders have sharply reduced the amount they extend to businesses. The question becomes: which businesses still qualify for financing?

This behavior is primarily driven by stricter regulations, higher capital requirements demanding greater safety buffers, and enhanced risk controls, which have made traditional lenders far more cautious. The tightening has caused them to limit credit lines and become more selective, creating a significant gap in the lending market.

But as conventional lenders scaled back, private investment funds stepped up, providing loans directly to businesses. This direct-lending model is known as private credit.

This broad category pools capital from institutional investors and high-net-worth individuals and lends directly to businesses and private individuals. Compared to traditional institutions, these funds offer faster, more flexible financing, resulting in a dramatic increase in their market share.

As this shift in how businesses raise capital accelerates, technology is reshaping how these loans are recorded and managed.

Increasingly, lenders are using 数字代币 to maintain secure, transparent records of loan ownership and transactions on blockchains. This combination of direct lending and digital infrastructure is establishing a new financial ecosystem that revolutionizes how lending is tracked, traded, and accessed.

How Private Credit Became the New Lending Powerhouse

Over the past decade, private credit has emerged as a major force in global finance. As banks become more cautious, loans are increasingly being originated, structured, and funded by flexible, yield-seeking capital from non-bank sources.

These loans are made by non-bank institutions such as asset managers, private equity firms, family offices, hedge funds, loan mutual funds, insurance companies, specialized credit funds, and business development companies (BDCs).

And instead of taking deposits from banking customers, these funds raise capital from institutional investors such as pensions, endowments, and sovereign wealth funds.

The loans are then made directly to companies, typically small to medium-sized. Target borrowers are sourced from funds’ proprietary networks and screened for the best opportunities based on demand, market position, and cash flows.

While financially solid, these non-investment-grade companies may not have easy access to public bond markets, making them ideal candidates for direct lending arrangements.

What makes this lending stand out is its reliability, structural flexibility, and speed. These funds don’t use standard bank loan structures; instead, they create loan agreements on their own terms. Because they are negotiating directly with businesses, lenders can decide the interest rate, repayment schedule, loan duration, covenants, and what happens if the borrower misses payments. Unlike traditional loans, these deals can be tailored to each business’s specific needs.

Moreover, compliance in the traditional lending space has become more complex, requiring more extensive regulatory checks from multiple bureaucracies, resulting in approvals slowing down from weeks to months. This has created friction in fast-moving industries, friction that has been eliminated by direct lenders operating with greater agility.

In the current environment, this asset class is also gaining attention for its relative stability compared to public equities. While stock markets can be highly volatile, these investments are backed by contractual cash flows. With interest payments agreed upon in advance, returns are more predictable here, especially in uncertain markets.

Returns are earned by charging borrowers an interest rate that “floats” above a reference rate. An extra percentage added on top of that base rate compensates investors for lending to riskier companies and dealing with illiquidity and less regulation than public debt markets.

Many of these loans are also secured by real assets or backed by companies with steady earnings, adding another layer of protection.

However, the space is not without challenges. For one, liquidity is lower than in public markets, so although investors have a defined repayment timeline, they can’t easily exit positions before maturity.

Also, transparency can vary because terms are negotiated on a case-by-case basis, and documentation is kept private. Besides, this asset class lacks the same level of oversight as traditional banks, and higher interest rates increase borrowers’ default risk. So, while generally stable, credit risk remains if businesses struggle, especially during economic downturns.

How Tokenization Unlocks Liquidity, Access, and Transparency

All these challenges affecting the traditional private credit market can be effectively addressed through this approach.

Tokenization is the process of converting ownership rights of a 现实世界资产（RWA）, such as a commodity, real estate, art, or loan, into a digital token on a blockchain, thus making things faster and cheaper while opening up the market to people from all over the world.

When it comes to converting private credit into digital form, an originator provides loans to businesses off-chain and then issues tokens that represent shares or claims of those loan assets or their income streams. These tokens can be bought, sold, or traded 24/7.

By representing the loan as a digital token, firms can make the slow and complicated transfer process more direct by removing the need for paperwork, manual checks, and third-party involvement. Instead of spending resources on administrative tasks, funds can focus on the actual lending and borrowing. Self-executing smart contracts automate the transfer of ownership, interest payments, and reconciliation, enabling near-instant (T+0) settlement instead of the typical T+2 process in traditional finance. The ability to settle transactions atomically, where both the asset transfer and the payment happen simultaneously, removes the risk and complexity that currently exists in financial markets.

For this market, liquidity is the biggest advantage. Breaking a loan into many smaller pieces, referred to as fractional ownership, lowers the entry barrier by allowing even smaller investors to buy portions of a loan that previously could only be accessed by institutional buyers. This opens the market to a wider range of participants and makes it more efficient overall.

This also means investors are no longer locked into large, illiquid positions for extended periods of time. By allowing trading in secondary markets, participants can exit positions earlier rather than holding them until maturity.

Besides freeing up capital, which can be deployed across different types of loans or properties, this process creates an immutable record of terms, ownership, and transactions. On decentralized public blockchains, anyone can check and verify the details of every transaction, which improves transparency and reduces the chance of errors or fraud.

These benefits helped the tokenized form of this asset class surpass $18 billion at the beginning of the year, accounting for half of the $36 billion tokenized RWA market, according to RWA.xyz.

This growth is driven by major institutions. In 2022, investment firm KKR launched its Health Care Strategic Growth Fund on the Avalanche blockchain, and the following year, Hamilton Lane converted its Senior Credit Opportunities (SCOPE) fund into digital form on Polygon and Ethereum.

More recently, Apollo brought exposure to this market on-chain for distribution and collateral use. In partnership with Centrifuge and Plume, the asset manager created Anemoy Tokenized Apollo Diversified Credit Fund (ACRDX), which serves as a feeder fund that provides digital access to the Apollo Diversified Credit Fund.

Apollo is committed to expanding tokenized access to institutional-grade credit strategies onchain, meeting global investors where they are with innovative yield products.

– Christine Moy, Partner at Apollo and Head of Digital Assets, Data and AI Strategy

As Banks’ Shares Decline, Private Credit is Becoming a Parallel Financial System

The rise of this asset class is supported by macro trends in traditional bank lending. Sustained tightening in lending standards, particularly for middle-market companies, while demand for credit remains strong, has created an imbalance.

So, lenders have stepped in aggressively to fill this void, and the sector has grown into a multi-trillion-dollar market globally, with continued expansion expected as banks remain constrained and institutional investors seek higher yields and more stable income streams.

Market data shows that traditional bank lending has declined significantly. The bank share of business debt has been declining since the mid-1980s, according to Bank Policy Institute data. It dropped from 30% in the early 1990s to 20% in 2021, reflecting a long-term shift away from bank-dominated corporate financing.

Meanwhile, banks’ share of buyout financings above $1 billion fell from 80% in 2018 to 39% in 2023, though it has since recovered to just over 50% in 2025, according to PitchBook data. A weakening or reversal in the Basel III Endgame implementation from the Trump administration could further help banks recover their eroding share.

在同一时间， proposed changes to bank capital requirements can incentivize more nonbank lending by encouraging banks to fund alternatives rather than compete directly.

This sector has experienced dramatic expansion in the post-2000 financial era. The market grew from less than $1 billion in the early 2000s to 今天超过3.5万亿美元 预计 达到5万亿美元 by 2029. Capital deployment alone reached nearly $593 billion in 2024, up 78% year-over-year, demonstrating the pace of scaling.

Direct lending is now estimated at around $1.8 trillion, competing with syndicated bank loans for mid-sized and large corporate deals, and finances 70% to 80% of leveraged buyouts. Even the tokenized segment has grown thanks to attractive yields, increased liquidity, lower investment minimums, enhanced transparency, and faster, automated settlement through blockchain technology.

While this asset class is nowhere close to displacing banks, the system is certainly evolving. What is emerging is not a replacement of traditional lenders, but rather a parallel ecosystem where banks increasingly originate, distribute, and finance risk, while alternative funds hold more of that exposure directly. In fact, large U.S. banks disclosed roughly $108 billion of exposure to this market in recent earnings reports, showing that traditional finance is becoming increasingly interconnected with alternative lenders rather than separate from them.

The Stock to Watch: 蓝猫头鹰资本 (OBDC )

One company well-positioned to benefit from the current trend in the lending market is Blue Owl Capital, a specialty finance company whose focus is on lending directly to successful small and medium-sized companies. Because middle-market borrowers are considered higher-risk clients as they struggle to secure loans from conventional banks, the firm charges higher interest fees to compensate for that risk.

Still, the company’s loans are typically backed by businesses with proven profitability, making their model relatively resilient even during periods of market volatility. Its expertise within this niche has positioned it as a leader in direct lending, and its scale allows access to high-quality deal flow that smaller players may not reach. As of 2025-end, it was holding $307 billion in assets under management (AUM).

The company provides businesses with capital solutions to drive long-term growth and offers individual investors, institutional investors, and insurance companies alternative investment opportunities that deliver risk-adjusted returns and capital preservation.

It currently maintains investments in more than 200 portfolio businesses across industries, including healthcare, insurance, Internet software and services, consumer products, food and beverage, manufacturing, asset-based lending and fund finance, buildings and real estate, aerospace and defense, and others. It operates through three multi-strategy platforms: Credit, Real Assets, and GP Strategic Capital.

However, the company has faced recent headwinds. OBDC underperformed the market and most of its peers due to challenges at non-traded funds that restricted withdrawals after investors sought to pull $5.4 billion from two flagship vehicles.

Rising concerns about exposure to companies threatened by AI spurred record redemption requests, with Glendon Capital Management claiming that BDCs were sitting on “larger losses than reported.”

Though the publicly listed vehicle itself wasn’t directly hit, contagion from its related funds caused panic among shareholders, driving the stock below NAV. Investors requested 40.7% of funds from the $3 billion tech lending fund and nearly 22% of the $20 billion Credit Income Corp fund in Q1 of 2026.

As redemption requests hit the limits, the firm imposed a 5% cap on withdrawals from both vehicles, which management said was done “in accordance with the fund structure, reflecting our commitment to balancing the interests of both tendering and remaining shareholders.”

To manage solvency, the company sold roughly $1.4 billion worth of direct lending investments to leading North American public pension and insurance investors. Co-President Craig W. Packer noted this transaction “attracted significant interest from sophisticated sources, allowing us to opportunistically extend the sale to OBDC.” The move is expected to help reduce leverage and increase portfolio diversity while creating “additional capacity to invest in compelling new opportunities for the benefit of shareholders.”

A recovery signal emerged last week when, as Bloomberg reported, the firm raised $400 million from bond investors, marking “the first deal of its kind in over a month, as worries about AI-disrupted software bets and looser lending standards have roiled the once red-hot industry.” The investment-grade-rated notes were priced to yield 6.5% and mature in 2028, suggesting renewed investor confidence in the sector.

These developments have supported a stock rebound. As of writing, OBDC trades at $11.69, up 7.87% over the last five days, while remaining down 5.15% year-to-date and 14.87% over the past year, putting market capitalization at $5.85 billion. The company carries an EPS (TTM) of 1.25 and a P/E (TTM) of 9.47, with a dividend yield of 12.81%.

For the fourth quarter, the firm announced a quarterly dividend of $0.37 per share, representing an annualized yield of 10%. During this period, it repurchased approximately $148 million of common stock, “the largest quarterly repurchase activity in our history,” at 86% price-to-book value, and increased its share repurchase program by $100 million to $300 million total.

On financial performance, the company reported $684 million in new investment commitments and $1.4 billion in sales and repayments for Q4 of 2025. GAAP net investment income per share was $0.38 while adjusted NII per share was $0.36, unchanged sequentially. Net asset value per share dropped from $14.89 in Q3 to $14.81, driven primarily by credit-related markdowns on select positions.

The company achieved the milestone of crossing the $300 billion AUM mark during the last quarter and ended 2025 with a portfolio size of $16.5 billion. According to co-CEOs Doug Ostrover and Marc Lipschultz, “results for the full year highlight record fundraising in our institutional and private wealth channels, reflecting robust investor interest in our strategies and continued global expansion.” Management emphasized that “OBDC closed the year with strong fourth quarter earnings and credit performance, reflecting the health of our borrowers and our defensive, senior secured strategy focused on the upper middle market.”

Latest Blue Owl Capital (OBDC) Stock News and Developments

结语

Private credit has emerged as a new and important way for businesses, especially mid-sized and fast-moving ones, to secure funding. By offering flexible, direct lending solutions, it has stepped in to fill the massive gap left by traditional banks, which have pulled back due to regulations and capital requirements, helping companies access the resources they need to operate and grow.

However, this lending model carries inherent challenges: illiquidity, opacity, and high entry barriers for smaller investors. Tokenization addresses these constraints by making loans easier to track and trade, offering enhanced transparency, reduced costs, and broader market access. As regulatory clarity improves and technology adoption accelerates, this hybrid approach is expected to play an increasingly significant role in global finance, expanding access to funding while creating new wealth-building opportunities for investors worldwide.