Some companies borrowing from private-credit funds remain vulnerable to financial pressure, with the International Monetary Fund warning that rising defaults and tighter financing conditions could expose weaknesses in the growing market.
In its Global Financial Stability Report, published on April 14, 2026, the IMF examined how deteriorating credit conditions could increase pressure on private-credit funds and the companies they finance. The analysis followed concerns raised in the fund’s October 2025 report about liquidity constraints among weaker direct-lending borrowers.
The global direct-lending market is estimated at about $2 trillion, according to the IMF’s April 2026 briefing. Direct lending involves non-bank investment funds providing loans directly to companies, offering an alternative to conventional bank financing.
In its October 2025 report, the fund said higher interest rates and economic uncertainty had weighed on direct-lending borrowers. Although earnings growth, declining policy rates and loan restructurings had eased some immediate pressure, liquidity remained strained among weaker companies.
Borrower downgrades had also increased, while defaults remained more common among companies that borrowed before central banks began raising interest rates in 2022. These older groups of borrowers included more firms facing liquidity constraints.
The IMF said direct lending often involves highly leveraged companies with variable-rate loans, leaving their ability to service debt dependent partly on economic growth and the pace at which interest rates decline.
Its April 2026 analysis examined how conditions could worsen if defaults increased or investors sought to withdraw money from funds offering periodic redemptions.
The IMF estimated that default rates in private credit were around 2% to 3% at the time of its April briefing. Under adverse conditions, they could rise to between 4% and 6%, the fund said.
It also estimated that about 15% of the global direct-lending market, equivalent to roughly $300 billion, was held in semi-liquid structures that allow investors to redeem their money periodically. Although many funds have mechanisms to restrict withdrawals, the IMF said such arrangements had helped contain redemption pressures so far.
The risks extend beyond individual borrowers. Private-credit funds have financial links with banks and other institutions, including insurers and pension funds. If borrowers default or funds face liquidity problems, losses and funding pressures could spread through these connections.
The IMF has called for closer monitoring of private-credit exposures and the potential for stress in non-bank financial institutions to affect the wider financial system.
Private credit remains an important source of business financing, but the fund’s analysis highlights the vulnerability of companies with weak cash flow and limited capacity to withstand tighter financial conditions.
The findings concern the global market and do not establish that African borrowers face the same conditions or that the IMF specifically directed its warning at Africa.
