A recent Bloomberg article article notes that regional banks are cutting back on areas like auto loans and financing for "buy now pay later" companies to shore up their balance sheets. But this is creating new opportunities for private lenders. Private credit funds now manage around $1.5 trillion in assets, doubling over the past decade. And the flexibility of their funding terms versus banks is allowing them to provide financing that consumers and lenders increasingly rely on.
However, some warn that private lenders' hunger for yield could lead to excessive risk-taking. So far, private credit has avoided major loan losses. But how they perform when the economy sours will be an important test.
For now, though, they are filling important funding gaps left by banks in areas ranging from mortgages to credit cards to personal loans. For consumers and lending companies, private credit provides a lifeline at a crucial time when traditional sources of financing are much harder to come by. So don't be surprised to see even more "Brought to you by Private Credit" in loan ads and applications in the future.
The rise of private lending in consumer credit shows how nimble new players can step in quickly as legacy institutions pull back. For anyone in lending or private credit, it's a trend well worth watching in the months ahead.