Small businesses and manufacturers represent the twin engines of the U.S. economy – driving local communities, generating jobs, and revitalizing critical industries and supply chains. However, both sectors consistently face a significant hurdle: a lack of accessible capital. As traditional banks increasingly withdraw from lending, numerous companies struggle to secure the financing necessary for growth, innovation, or simply to remain operational. This is where private credit is stepping in, effectively filling the gap and fueling economic expansion precisely where it's most needed. Private credit offers rapid, customized financing solutions for companies that often fall outside the lending criteria of conventional banks – those deemed ‘too small,’ ‘too new,’ or ‘too unconventional.’
A recent study commissioned by the American Investment Council and conducted by EY (formerly Ernst & Young) reveals that a staggering 70% of borrowers turned to private credit precisely because they were ineligible for bank syndication. Beyond speed of execution (91%), larger loan sizes (82%), and more adaptable terms (77%) were also cited as top reasons for utilizing private credit. In 2024, private credit-backed companies employed a substantial 811,000 people, generating $87 billion in wages and benefits, and contributing $145 billion to the gross domestic product. The median company supported by private credit employs just 182 individuals.
When considering suppliers and associated local spending, this economic activity supports an impressive 2.5 million jobs and $370 billion in economic output. Unlike traditional lenders who often adhere to stringent and inflexible requirements, private credit investors cultivate strong, enduring relationships with borrowers, frequently incorporating operational support and strategic guidance into these partnerships. A compelling example is Otter Learning, an early childhood education company, which, when traditional financing options proved insufficient, secured private credit from The Riverside Co. This investment facilitated the provision of enhanced health and retirement benefits for staff, the recruitment of new employees, and the expansion of access to high-quality education programs. Private credit isn’t solely focused on sustaining existing businesses; it actively fuels innovation, expansion, and job creation.
Notably, private credit supports over 201,000 manufacturing jobs through financing vital equipment upgrades, expanding production capabilities, supporting strategic acquisitions or market growth initiatives, and facilitating succession planning for family-owned manufacturing businesses. This is particularly crucial for capital-intensive manufacturing sectors – including aerospace, automotive, electronics, and military manufacturing – which are paramount to U.S. economic competitiveness. Private credit is also playing a vital role in traditional manufacturing regions, directly supporting 62,000 jobs in Michigan, 84,000 in Ohio, and 91,000 in Pennsylvania through direct investments and substantial secondary consumer and supplier spending. The strength of this sector is key to the continued prosperity of the nation.
Despite these considerable benefits, some critics advocate for increased regulation of private lenders, mirroring the oversight applied to banks. However, a recent Federal Reserve report indicates that private credit poses limited systemic risk. Imposing unnecessary regulations or taxes on this industry could severely restrict capital flow to businesses that desperately need it, hindering economic growth. Jamal Hagler, Senior Vice President of Research at the American Investment Council/InsideSources, emphasizes the critical role private credit plays in bolstering American industry and supporting millions of jobs. The continued growth and stability of private credit represent a significant asset to the U.S. economy, providing essential capital to businesses across a wide range of sectors, driving innovation, and promoting economic prosperity.
