Unlocking the Potential of Nonbank Loans for Middle-Market Businesses
The Rise of Nonbank Loans
Nonbank loan channels have expanded significantly post the Great Recession, providing alternative financing options for U.S. middle-market businesses. As banking regulations constrained traditional loans, independent asset managers entered the scene, offering secured, first-lien commercial loans.
Private Equity Influence on Direct Middle-Market Loans
The growth in direct middle-market loans is fueled by the rise of middle-market private equity. Private equity sponsors prefer borrowing from asset managers due to speed, execution certainty, and financing flexibility.
Performance Update
Cliffwater’s “Report on U.S. Direct Lending” analyzes the performance of private loans, showcasing a 3.02% total return in the fourth quarter, with a 12.49% return over the trailing four quarters.
