According to data from Capital IQ, private credit accounts for 91% of leveraged finance in the U.S. and 65% in Europe. In Australia, it’s just 9%. Here's why that gap presents a major opportunity—not a problem.
Private credit is a broad term. At its widest, it encompasses a range of lending arrangements outside the traditional banking system—from large-scale leveraged buyout financing to asset-backed lending and direct loans to private companies. This article focuses on a specific and increasingly relevant corner of that landscape: how private credit is emerging as a flexible growth tool for small to mid-sized Australian businesses.
The Global Context
In the U.S., private credit is now the dominant form of leveraged finance—outpacing traditional banks in funding growth-stage and mid-market businesses. Europe is not far behind. Yet in Australia, private credit accounts for less than 10% of the market.
This discrepancy isn’t a weakness. It’s an early-stage signal. We’re where the U.S.was a decade ago — before flexible credit started fuelling entire segments of the innovation economy.
What Is Private Credit, Really?
Private credit—also known as private debt or private lending—is a form of business financing that operates outside public markets. It includes direct loans, private notes, unlisted bonds, and other bespoke lending arrangements. These instruments are typically not traded and are designed to meet the specific capital needs of private businesses.
What distinguishes private credit is who provides it and how it’s structured. Instead of banks, the capital comes from non-bank institutions—specialist credit managers, superannuation funds, insurers, family offices—who either originate loans directly or purchase them in the secondary market.
For many companies, particularly those in the scale-up phase, private credit provides a more flexible and founder-aligned alternative to both equity and traditional debt.
Why Australia Lags—and Why That’s Changing
Australia’s private credit market is still early-stage. That’s not due to a lack of demand—but rather to longstanding structural factors:
There are three key reasons for the slow uptake:
- A concentrated banking sector: The “Big 4” banks have historically satisfied most corporate financing needs, limiting the space—and urgency—for alternative lenders.
- A younger venture ecosystem: Until recently, Australia had fewer late-stage startups with revenue scale, so the need for structured or non-dilutive credit was limited.
- Limited capital diversity: Many founders defaulted to either venture capital or bank loans, simply unaware that more flexible, in-between solutions existed.
But that’s changing—and fast.
Several shifts are driving private credit toward the mainstream in Australia:
- Private credit is maturing as an asset class. Super funds, insurers, and family offices are allocating more capital to private debt strategies in search of yield and diversification. This growing investor base is creating greater liquidity and better pricing for borrowers.
- Non-bank lenders are stepping in to fill critical gaps. A growing cohort of private lenders—like Mighty Partners—are building products designed specifically for scaling businesses: revenue-backed loans, bridge financing, structured term debt. These are capital solutions tailored to how modern companies operate.
- There’s a new focus on structure and profitability. More founders are focused on structure and profitability, not just top-line growth. They’re thinking in terms of capital efficiency, dilution, and control—making structured credit an attractive part of the toolkit.
Together, these trends are bringing private credit from the periphery to the core of capital planning for a new generation of operators.
The Growth Opportunity
The goal isn’t to displace bank lending—it’s to grow the overall pie. As more Australian businesses move beyond early product-market fit and into the scale phase, private credit has an important role to play.
Structured capital is particularly useful for:
- Supporting growth iniaitives including M&A or local/international business expansion
- Extending runway without giving up equity
- Serving businesses that don't fit traditional VC or bank profiles
Used well, it unlocks growth while preserving optionality.
A Nascent Market With Momentum
As interest rates fluctuate and equity rounds take longer to close, private credit is no longer a last resort—it’s a strategic option. Australia’s market may still be small, but it’s growing fast. The businesses who understand how to use it early stand to gain a real edge.
Want to understand how structured capital might fit your growth plan? Let’s talk.
Book an introductory call with our Investment Manager, Luka Flannigan.
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