The Federal Reserve Board published analysis finding that larger middle-market firms can shift between private credit and leveraged loans as financing conditions change, while smaller firms have fewer alternatives and are more exposed to a private credit pullback. Private credit and leveraged loan markets each totaled about USD 1.4 trillion at the end of 2025 and together represented around 45% of lending to private nonfinancial corporations. The markets serve similar industries and credit profiles but differ in liquidity, lender composition and funding structures, allowing their financing conditions to diverge. Among larger firms, 41% have accessed both markets, compared with 25% of smaller firms, while 57% of smaller firms rely exclusively on private credit. Larger borrowers have recently increased switching from private credit to leveraged loans as private credit conditions became less accommodative, but substitution among smaller firms remained limited. Because larger and smaller firms each account for about half of private credit loan volume, migration to leveraged loans could mitigate, but not eliminate, the effects of a private credit contraction.
Federal Reserve Board2026-08-11
Federal Reserve Board analysis finds smaller firms more exposed to private credit tightening
Federal Reserve Board analysis finds that larger middle-market firms can shift between private credit and leveraged loans when conditions diverge, while smaller firms have limited alternatives. The two markets were each worth about USD 1.4 trillion at the end of 2025, so substitution could reduce, but not eliminate, the impact of a private credit pullback.