"The debt that most Americans have dealt with - from credit cards to mortgages - has been upfront: there are bills to pay, balances that are visible, and credit ratings that assess a borrower's creditworthiness. Private credit, or loans made to companies by private investor money gathered into a fund, is much less regulated and much more opaque. The exact terms of the loans, their price, and their ratings can be kept in the shadows and out of regulators' sight."
"Meanwhile, private credit has become the hottest business for some of the finance industry's premier names, including Blackstone and Apollo. To proponents, like Apollo CEO Marc Rowan and Blue Owl co-CEO Mark Lipschultz, access to funding with less onerous requirements is helping American businesses thrive. To naysayers, including UBS Chairman Colm Kelleher and IMF Head Kristalina Georgieva, this explosion of less-transparent debt is unsustainable, and the dubious terms of many of these loans could lead to economic trouble."
Private credit consists of loans made to companies by private investor money gathered into funds and operates with far less regulation and opacity than consumer credit. The industry has expanded to roughly $3 trillion and now funds small and midsize business growth, from manufacturing equipment purchases to dental-practice expansion. Major asset managers such as Blackstone, Apollo, and Blue Owl are heavily involved. Supporters argue easier access to capital with fewer requirements aids businesses. Critics, including senior banking and IMF officials, warn that opaque terms and limited oversight create sustainability concerns and heighten the risk of broader economic fallout. Rule changes are set to open private credit to large-scale retail investment.
Read at Business Insider
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