Brian D. Buehler | Triton Pacific Capital Partners
As banks become more stringent with their loan policies, private credit is providing companies with greatly needed capital and investors with great potential investment opportunities.
Amidst the Federal Reserve’s recent aggressive monetary policy tightening cycle, characterized by eleven consecutive interest rate hikes, traditional lenders have adopted a cautious stance.
Banks have become more conservative with their underwriting standards and exhibited declining economic optimism, as evidenced by the Community Bank Sentiment (CSBS) Index, which has remained negative for eight consecutive quarters.
Similarly, as of January 2024, 14.5% of banks reported tightening standards for commercial and industrial (C&I) loans for large and medium businesses, and 18.6% reported tighter standards for small businesses. This follows a December in which banks reported tighter standards for 33.9% of large and medium businesses and 30.4% for small businesses.2
30.6% of banks also increased the cost of credit lines for large and medium firms, while 34.5% reported increasing the cost of credit lines for small businesses. This comes after an aggressive December 2023 in which 50% of banks reported an increase for large and medium businesses and 44.6% reported an increase for small businesses.2
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