Banks Reassess Private Credit With Real-Time Data in Hand

Private credit has moved into the financial mainstream, recently estimated at $2 trillion in outstanding loans and investments that support companies across a wide range of industries.

The market’s reach extends well beyond nonbank lenders and according to some estimates will top $3.5 trillion by 2028. Banks and institutional investors supply the financing that keeps direct lending flowing, creating a network of shared exposure to borrower performance. As the private credit market grows, real-time financial data is and will be a critical resource for understanding risk and managing repayment behavior.

Banks Behind the Curtain

Private credit is often described as lending outside the banking system, yet banks remain deeply connected to private credit. Banks provide credit lines, financing facilities and risk transfer instruments that support fund managers’ ability to originate new loans. That indirect role means banks share exposure to borrower performance. When private credit funds need liquidity or restructuring support, that risk can appear on bank balance sheets even when traditional financial institutions did not underwrite the original deal.

Growing interest in real-time data reflects that interdependence. If banks and private credit firms see the same day-to-day financial behavior from borrowers, pricing and risk management become more coordinated. Recent PYMNTS coverage notes that institutions are looking more closely at shared data standards during periods when credit conditions shift.

Loan Sizes Have Grown Faster Than Transparency

The Federal Reserve has noted that deal-level data shows average loan sizes have exceeded $80 million since 2022.  These loans commonly finance middle market firms with revenue between $10 million and $1 billion.

Many operate in sectors that feature limited tangible collateral, including software, financial services and healthcare. More than half of private credit value sits in these lower collateral categories.

That reality affects recovery values. Post-default recovery on private credit loans averages around 33%, as compared with recovery rates above 50% for syndicated loans.

Because those borrowers cannot pledge large physical assets, lenders need information that offers a real view of financial health. Cash flow underwriting approaches look at a company’s ability to produce liquidity consistently. Instead of periodic documentation, lenders track continuous payment activity and expense patterns.

Real-Time Data Helps Fill the Collateral Gap

Real-time financial data provides signals that traditional underwriting can miss. Regular invoice payments, payroll flows, settlement timing and expense stability give lenders a way to measure operational discipline. By reviewing bank transaction data, lenders can detect whether a borrower’s revenue is steady, whether liquidity fluctuates suddenly or whether vendor payments slow significantly.

Middle-market borrowers benefit because they may not have long credit histories or standardized accounting disclosures. Their true financial standing is better understood through real-time metrics than backward looking financial snapshots. PYMNTS reporting shows that permissioned financial data access can help validate borrower health more quickly.

Interest coverage ratios for direct lending borrowers have averaged around 2.0 times earnings, per the Fed data, a level that suggests many borrowers can manage current costs but may face additional pressure if revenue weakens or borrowing costs remain high.

Real-time data helps lenders react faster when repayment stress begins to emerge.

Loan pricing reflects these risks. Spreads on private credit loans are generally higher than spreads on comparable syndicated loans, the central bank detailed. Although the gap narrowed for several years, borrowing cost rose after 2022 and widened that difference again. Faster real-time data can make pricing more aligned with true borrower strength.

Ripple Effects Travel Through Connected Institutions

Private credit loans are often structured through multiple lenders. The average number of lenders per loan facility has increased over time. That sharing of exposure demands coordination among institutions. Early data visibility can encourage lenders to restructure loans before repayment problems escalate. Banks that finance these deals have a stake in those outcomes. Recent coverage highlights rising concerns around indirect exposures.

Pension funds, insurance companies and family offices also commit capital to private credit strategies. Real-time borrower data reduces surprise capital calls and promotes more informed allocation decisions. PYMNTS reporting points to new data flows between platforms and lenders that highlight liquidity stress early.

A Holistic View Supports Safer Growth

Private credit shows no signs of slowing. Dry powder has increased, indicating investor demand remains strong. Real-time data helps lenders evaluate creditworthiness continuously rather than periodically. Better transparency could make private credit expansion more stable for lenders, banks and especially for the borrowers who rely on continued access to capital.