It’s difficult to follow the news lately without running into the private credit debate. “How risky is this asset class?” is a common refrain on CNBC.
In recent weeks, the conversation has grown into something bigger: whether individual investors should be in alternative assets at all. Is there a fundamental mismatch between private markets and non-institutional capital?
It’s an important debate, and it deserves a thoughtful perspective. Some of the recent commentary has fallen short. The best approach is to step back, trace how private credit developed, and evaluate its fundamentals and risk profile today.
What Explains Private Credit’s Growth?
Perhaps the most common misconception about private credit is that it exists to finance so-called “unbankable” companies. The thinking goes: when weak businesses can’t secure loans from traditional banks, private lenders step in.
This is a fundamental misunderstanding of the asset class, both past and present.
Since 2008, the number of U.S. banks has fallen from 9,000 to about 5,000. Among those that remain, business lending has become a smaller part of their overall activity, driven largely by regulations that made it more complex and less profitable.
Over the same period, the number of privately held companies has grown by roughly 400 percent. Thousands of new businesses needed financing just as traditional lenders were pulling back. Private credit grew to meet that demand.
Today, as a former Fed Vice Chair recently put it, “(private credit) helps keep Main Street moving.” (This represents the view of one individual and should not be interpreted as a government or regulatory endorsement of private credit as an investment.) Private credit has become an increasingly significant source for financing growth and acquisitions of middle-market businesses.
How Is Private Credit Performing Today?
This context brings us to today’s debate: is private credit healthy? Let’s assess the asset class as a whole.
The median private credit borrower is a middle-market company, like a healthcare services business or a midsize manufacturer. These firms employ more than 50 million Americans and account for one-third of the U.S. GDP. The median borrower generates about $30 million in EBITDA, and more than 70 percent reported year-over-year revenue growth in 2025.6
Current non-accrual rates—when borrowers stop making interest payments—are below two percent. Total default rates, at 4.5 percent, are comparable to historical averages. These rates are subject to change and may increase due to economic conditions, rising interest rates, or other factors.
It’s also important to understand how these loans are structured. Most private credit sits at the top of the capital stack as senior debt, giving lenders first priority in repayment. They are typically secured by the borrower’s assets, such as real estate or accounts receivable. As a result, they have a historically lower risk profile than subordinated debt or equity, which sit further down the stack. However, senior secured lending still carries material risks, including borrower default and loss of principal.
This isn’t to suggest private credit is without risk. Outcomes vary based on the underlying investments and market conditions, and past performance is no guarantee of future results. The point is that any story that ignores these fundamentals is incomplete. Private credit is allocated to by a significant percentage of institutional investors.
A Closer Look at Recent Bankruptcies
Some of our current discourse dates back to October, when Tricolor and First Brands—both backed by private credit—filed for bankruptcy. Were these high-profile defaults isolated incidents, or a harbinger of broader risk?
Early analyses of both bankruptcies point to company-specific issues. Tricolor and First Brands are alleged to have double-pledged assets across multiple credit lines and failed to disclose key information to investors.
While current default and non-accrual rates remain within historical ranges, these cases highlight risks that can arise from inadequate underwriting and disclosure failures. Such risks are not unique to these borrowers and may be present more broadly in private credit markets, where transparency and regulatory oversight differ from public markets. This highlights the importance of manager selection. Identifying and investing with managers—who apply rigorous due diligence—has historically been associated with more favorable outcomes, though no level of due diligence eliminates the risk of loss.
What Should Individual Investors Know About Private Credit?
Finally, we turn to the last part of this debate: whether individual investors should be in alternative assets at all. The issue is often framed as a false binary—should they have access or not. In reality, it depends.
Private credit requires capital to be committed for extended periods, with limited or no liquidity. Investors need to be comfortable setting money aside for several years. If you need the ability to redeem capital at any time, private credit may not be a fit for your portfolio.
Private assets are illiquid by design. Multi-year horizons give managers the time to execute their business plans, which has been associated with the potential for an additional return, sometimes referred to as the illiquidity premium. However, illiquidity also means investors may be unable to access their capital when needed, even in adverse circumstances, and the illiquidity premium is not guaranteed.
In the end, access isn’t a yes-or-no question. It’s about fit: matching an investor’s goals with the right assets so they can participate with clarity and confidence.
The question dates back to October, when Tricolor and First Brands—both backed by private credit—filed for bankruptcy. In the aftermath, redemption requests rose across many funds, prompting some brokers to pause distributions.
How Crowd Street Approaches Access
Crowd Street’s purpose has been to facilitate access responsibly, so individuals can participate in the same types of investment opportunities as institutions, but only when they can do so responsibly. The platform exclusively serves accredited investors, who may be better equipped to evaluate and bear the risks associated with illiquid assets like private credit.
Crowd Street now partners with Callan, an independent investment consultant, on manager selection, which can play an important role in risk management. Callan is an investment consultant to more than 475 institutional clients and approximately $3 trillion in assets under advisement.
Certain funds on Crowd Street’s platform are researched and reviewed through Callan’s due diligence process, led by a team of more than 25 alternatives specialists.
Today, Crowd Street offers access to private credit funds from global asset managers, including StepStone and Nuveen. Accredited investors can review available fund offerings on the Crowd Street platform. Each offering includes its own risk factors and terms, which should be carefully reviewed before making an investment decision.
This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Private credit investments involve significant risks and are not suitable for all investors. These assets are typically illiquid, with capital committed for extended periods and limited or no ability to redeem. Investors may experience partial or total loss of capital, and returns are not guaranteed. Performance depends on the underlying borrowers, market conditions, and manager execution, and may be impacted by factors such as borrower defaults, rising interest rates, economic downturns, and reduced access to refinancing. Valuations are often based on estimates rather than observable market prices, which can introduce additional uncertainty. Past performance is not indicative of future results. Investors should carefully consider their financial situation, investment objectives, and risk tolerance before investing.
Callan is an independent investment consulting firm retained by Crowd Street for various services. Not all offerings on the platform undergo Callan's review. This review does not guarantee investment performance or eliminate the risk of loss.
