Direct Lending Is Growing: What Investors Should Check Before Allocating
An investor reviews direct lending terms, fees, covenants, and portfolio risks. Direct lending is growing because borrowers need flexible non-bank capital and investors want income that can differ from public bond markets. Before allocating, you should check the manager, loan quality, fees, covenants, liquidity terms, and portfolio fit. This guide helps you move past the headline growth story and assess whether a direct lending fund deserves capital. You’ll see what to review before committing, where risks tend to hide, and how to compare private credit exposure with other income options in your portfolio. The Rise Of Direct Lending: A Structural Shift Direct lending refers to loans made directly to companies by non-bank lenders, often through private credit funds. These loans commonly finance middle market companies, sponsor-backed transactions, acquisitions, refinancing needs, or growth plans. The lender negotiates terms directly with the borrower or sponsor, rather than b...