As we enter 2025, the global private credit market is poised for another transformative year, underscored by economic uncertainty, regulatory changes, and evolving borrower needs. Private lenders continue to reshape the lending landscape as traditional banks remain constrained by regulatory pressures and risk-averse practices. Here are five key trends and opportunities to watch in private credit as we navigate the coming year.

1. Regulations and capital limits squeeze traditional banks

Tighter regulatory frameworks, notably under Basel III, continue to challenge traditional banks’ ability to lend, leaving room for private credit providers to fill critical capital gaps. Regulatory scrutiny has made banks increasingly risk-averse, focusing on high-quality, investment-grade lending while shying away from higher-risk opportunities. This leaves a significant demand for flexible capital solutions that private creditors are uniquely positioned to meet, particularly for middle-market businesses and emerging sectors. With Donald Trump’s recent election win in the US, deregulation may reappear on the domestic agenda. However, any such changes are not global in scope, and Basel III’s influence continues to shape lending practices worldwide. Private credit will remain a primary capital source for borrowers globally, stepping in where traditional banks cannot.

2. Growing demand for customisation

One of the hallmarks of private credit is its ability to offer tailored financing solutions, which has become even more critical in a rapidly changing economic environment. Unlike traditional banks, private creditors engage closely with borrowers, developing bespoke solutions such as cash-flow-based loans, asset-backed financing, and alternative deal structures. This flexibility allows private credit lenders to respond rapidly to market shifts, often providing access to capital within weeks compared to months for traditional bank loans. As businesses look for adaptive and bespoke capital solutions, private credit will increasingly differentiate itself by addressing complex and niche borrower needs.

3. APAC: fragmented but high potential

The Asia-Pacific (APAC) region is an exciting frontier for private credit but remains highly fragmented, with varied regulatory landscapes and jurisdictional complexities across different countries. Markets for leveraged buyouts (LBOs) and high-yield (HY) instruments are still nascent in many parts of APAC, creating an even greater need for private debt solutions. Private credit providers are uniquely positioned to address these gaps, particularly as traditional banking systems in the region often lack the flexibility to cater to middle-market and SME borrowers. SC Lowy’s investments in India, where IRRs range from 16–20% in USD-adjusted terms, demonstrate the lucrative opportunities in APAC. Private credit’s role in bridging funding gaps across infrastructure, sustainability, and SME sectors will be crucial as these economies aim to keep pace with global growth.

4. Infrastructure and sustainability investments gain traction

Private credit will continue to play a pivotal role in financing infrastructure and sustainable development projects, particularly across Asia and the Middle East. With large-scale infrastructure initiatives booming in these regions, private lenders are expected to lead capital provision, supporting critical sectors such as real estate, transportation, and renewable energy. This focus not only drives economic connectivity but also aligns with broader ESG goals. By promoting sustainability through targeted investments, private credit funds can meet the dual objectives of strong financial returns and positive social impact, an appealing proposition for ESG-minded investors.

5. High but stable interest rates shape market dynamics

While interest rates may not rise further in 2025, they are expected to remain elevated, creating a challenging environment for traditional bank lending. This dynamic continues to steer businesses toward private credit as a flexible, strategic alternative. High-yield loans and bespoke debt instruments offered by private lenders are increasingly sought after, especially in volatile markets. Private credit providers, leveraging deep sector expertise and local knowledge, are well-positioned to navigate these challenges and deliver risk-adjusted solutions. As businesses adapt to prolonged higher rates, private credit will serve as a vital partner for bespoke capital access.

Looking Ahead

The private credit market is set to solidify its standing as a crucial component of the global financial ecosystem next year. As traditional banks face ever-tightening regulations and risk management constraints, private credit will continue to evolve, offering tailored, agile financing solutions that fuel business growth across regions and sectors. For APAC, the need for private debt is amplified by its fragmented nature and the underdeveloped state of LBO and HY markets. Globally, as rising rates stabilise but remain elevated, private lenders will address unmet needs with innovative, adaptive strategies. The year ahead represents unparalleled opportunity for private credit providers to drive economic expansion, build infrastructure, and promote sustainability, cementing their role as indispensable players in global finance.