Private Debt – A Cornerstone of Growth Amid Economic Uncertainty

In an era of shifting financial landscapes, private debt has solidified its role as a crucial alternative funding solution for high-growth businesses. As traditional banking channels tighten amidst global economic turbulence, private debt’s flexibility and tailored solutions are proving increasingly attractive for companies navigating volatility.

Market Trends: Private Debt Continues to Outpace Traditional Lending 

As we head into Q4 2025, the global private debt market has reached an estimated $1.5 trillion in assets under management, with projections for further growth in 2026. This continued rise highlights private debt’s increasing appeal as institutional investors seek stable, high-yield returns amidst an environment of low interest rates and heightened market volatility. 

In Europe, private credit has seen a surge in demand for both direct lending and structured finance solutions. According to Preqin, private debt funds raised a record $125 billion in 2025, a 15% increase from the previous year. The key drivers for this growth are the robust demand from mid-market companies and the increasingly competitive landscape in traditional credit markets. 

Economic Uncertainty: How Private Debt Became the Go-To Solution for Risk Mitigation 

The ongoing economic uncertainty, particularly in the wake of geopolitical tensions and tightening central bank policies, has made private debt a preferred financing tool. As inflation concerns persist, businesses are increasingly turning to flexible debt structures that provide immediate access to capital without the constraints often tied to equity financing. 

Recent reports from Reuters (November 2025) show that private debt funds have outperformed public markets, offering superior risk-adjusted returns. For instance, the Private Debt Investor index has shown a year-to-date performance of 8.5%, compared to an average return of just 5.2% for publicly traded debt funds. 

With more founders seeking to avoid dilution and preserve control, private debt is emerging as an ideal solution for funding expansion, acquisitions, and working capital needs. The ability to structure bespoke facilities, including asset-backed loans, revenue-based financing, and convertible debt, is a key selling point for businesses in the current economic environment. 

Key Sector Focus: Mid-Market Lending Gains Traction in Private Debt 

Mid-market lending continues to accelerate, particularly across technology, healthcare, and renewable energy — sectors where businesses require flexible capital to scale, innovate, and compete. 

• Technology & Digital Transformation: 
  High-growth software and fintech companies are raising private credit to accelerate expansion, fund product development, and strengthen their balance sheets without equity dilution. 

• Healthcare & Life Sciences: 
  Borrowers in biotechnology, diagnostics, and medical devices are using private credit to finance clinical trials, acquire specialist equipment, and support strategic M&A. 

• Sustainability & Renewables: 
  The shift towards clean energy has created rising demand for funding in solar, wind and battery storage projects — with private credit enabling faster deployment and operational scale. 

Risks & Challenges: Navigating a Shifting Landscape 

Despite continued growth, the private debt market is not without its challenges. Yield compression and increasing competition among lenders are reshaping deal terms, making it essential for borrowers to navigate the market with clarity and preparation. 

A recent Financial Times article (October 2025) highlighted rising regulatory scrutiny across the UK and EU, with new rules designed to improve transparency, strengthen governance, and reduce systemic risk in private credit. These developments are expected to influence structuring, reporting, and lender appetite in the coming years. 

At the same time, ESG considerations continue to gain prominence. Both investors and borrowers are incorporating environmental and social metrics into deal structuring — a positive evolution, but one that adds complexity as standards evolve and expectations rise. 

For businesses seeking funding, understanding these shifts is crucial to securing competitive, flexible capital. 

Conclusion 

Private debt has firmly established itself as a cornerstone of corporate finance, providing businesses with much-needed flexibility and access to capital in uncertain times. As trends in the private debt market evolve, companies must stay informed and adapt to maximise opportunities while managing risks. 

At Fuse Capital, we’re committed to helping you navigate the complexities of the private debt landscape and connect you with the right solutions to fuel your business growth.