Introduction
Private lending wasn't built on complex financial models. It was built on speed, sound judgment, and strong relationships, on solving real problems for real borrowers when banks couldn’t or wouldn’t step in. Over the last decade, this hands-on, flexible market has grown quietly but rapidly, evolving from a $375 billion niche into a multi-trillion-dollar global asset class.
But with growth comes temptation.
As private credit firms try to attract institutional capital, many see securitization as the logical next step. On the surface, the benefits seem obvious, cheaper funding, quicker capital recycling, and broader distribution. On paper, it looks like progress. In practice, it’s something else entirely.
Securitization might create short-term liquidity, but it risks eroding the core strengths that made private lending effective in the first place. It demands standardization in a market built on flexibility. It adds layers of complexity where simplicity once drove success. And it misaligns incentives in ways that resemble the very shortcomings private credit was meant to avoid.
This article explains why, despite its financial upside, securitization might weaken the foundation of private lending. It outlines early warning signs, rising default rates, reduced borrower transparency, and increasing systemic exposure, and proposes a more sustainable path forward. A path preserving what matters most, trust, control, and real-world value.
Private lending was never meant to become Wall Street’s next product. It should remain Main Street’s most effective solution.
Private Lending’s DNA: Customization, Speed, and Risk Alignment
Private lending, often called direct lending, gained popularity as a reliable alternative to traditional banking after the 2008 financial crisis. As regulatory pressure mounted on banks, non-bank lenders stepped in to meet the needs of small and mid-sized businesses, offering capital with greater speed, flexibility, and fewer bureaucratic hurdles. The value proposition was straightforward, private lenders could structure deals around the borrower, rather than forcing the borrower to fit the deal.
This tailored approach, combined with faster decision-making and the ability to handle complex credit profiles, quickly became the industry’s defining characteristic.
The market response was strong. In 2009, private credit assets under management stood at roughly $375 billion. By 2024, that number had grown to over $3 trillion. Institutional investors, in search of higher yields during an extended low-interest-rate environment, moved significant capital into the space. They were attracted not just by returns, but by the additional protection provided by relationship-driven lending and custom deal structures.
What continues to set private credit apart is the alignment of interests. Unlike banks that originate loans to sell them off, private lenders usually keep loans on their own books or within the funds they manage. That kind of ownership keeps lenders close to risk and closer to the borrower. It leads to better understanding, disciplined deals, and smarter credit decisions.
At its core, private lending has always been about context, knowing the borrower, understanding their business, and structuring capital to support genuine outcomes.
