Private credit in Australia: Growth, opportunity, and what’s next for PE sponsors

The growth in private credit over the past few years means understanding this sector of the debt markets, and the benefits private credit can provide, is increasingly important for Private Equity sponsors.

Background

Private credit involves the provision of loans and other form of finance by non-bank lenders. It is part of the broader private credit sector, alongside Private Equity.

While private credit has been a feature of the Australian debt markets for many years, the past few years have seen significant growth in this space in two ways. First, there are now a much greater number of domestic and international private credit funds operating in the market. Second, and perhaps more importantly, private credit has shifted from operating in a relatively narrow range of transaction types to now being involved in deals across the credit spectrum. This has been particularly noticeable in the leveraged finance market, with private credit funds taking on an increasingly prominent role in financing many transactions.

This growth means understanding private credit and how to best incorporate it into Private Equity financing processes can be key factors for sponsors seeking enhanced outcomes on their deals.

To assist, we have launched the following report and article:

• our inaugural report, ‘A pulse on private credit investment in Australia 2025’, which can be accessed here; and
• an article summarising the key findings from a report into the private credit market in Australia recently released by ASIC. Our article can be accessed here.

Key highlights from the HSF Kramer report

Our report was released earlier in 2025, and reveals insights from senior leaders across ten global and national organisations directly involved in the Australian private debt market. Some key highlights from our report include:

• over 90% of respondents expect continued growth in the share of the corporate debt market provided by private credit over the next decade, with 50% anticipating significant growth
• while borrower perceptions of high lending costs was identified as the top barrier to growth, it was also recognised that private credit provides many advantages to sponsors. These include flexibility with structuring transactions and speed of execution
• private credit funds have a range of IRR targets, meaning different funds will operate at different points on the credit spectrum
• an even split of views as to whether regulatory reform is needed, which is noteworthy given the increased regulatory scrutiny on private markets (as described further below).

Key highlights from the report released by ASIC

ASIC recently published a report into the private credit market in Australia. This report was commissioned by ASIC to provide it with foundational insights into the sector. We expect this report provides an indication of the likely direction and focus of ASIC’s ongoing investigation into the sector, with ASIC due to release its own findings in November 2025. As such, it is important for market participants to understand the likely areas of regulatory concern and focus and how this may influence the continued development and operation of the market in Australia.

Our article provides a summary of the report’s key findings, including as to:

• the composition of the Australian private credit market;
• how the Australian private credit market differs from overseas markets;
• areas of concern identified by the authors of the report and what the authors consider to be good practice; and
• topics and issues which ASIC may consider, with the report identifying remuneration and fees, valuations and related party transactions and governance as the priority areas.

Relevance for sponsors

In short, the growth in private credit provides an opportunity for Private Equity sponsors to diversify their funding sources and look to private credit to complement the activities of traditional lenders. This can create more competitive financing processes and allow sponsors to close financing transactions relatively quickly and on terms that are more flexible than would otherwise be the case.

In addition, the regulatory scrutiny of the market is also evolving and it is important for sponsors to be aware of the areas of likely regulatory concern and how this may impact on the operation of the market in Australia.