Providing a competitive alternative for Australian corporates.

With the big banks tightening their lending criteria and other traditional funding sources such as bonds not as fast or flexible, the popularity of the private lending market has continued to increase, hitting a new all-time high in 2018.

Ernst and Young’s (EY) analysis shows that as at 31 December 2018, there is now over A$80bn of private debt within the total corporate debt market, making up about 7%. This trend is reflected globally with the figures looking to reach $1.5tr by 2020.

This growth indicates a shift towards a more diverse make-up of debt funding sources within Australian corporates, that are following in the steps of countries such as the UK and USA. On the flip side, an increasing number of corporate investors are launching their capital into private debt to take advantage of the opportunities it provides in being a “stable, yield generating asset class”.

2019—where are we going?

With more competitive rates, the ongoing regulatory investigations and the associated implications burdening the big banks, growth in the private debt market is expected to continue in the coming year with SMEs also soon able to benefit from increased funding options.

Sebastian Paphitis, Partner and Joint National Head of Capital & Debt Advisory at EY stated that “Some fund managers [are] looking to open up new lending mandates or provide capital to SME focused non-bank lenders and fintechs. In addition, the Government’s recent announcement of a new $2bn SME Lending Fund and the separate SME Business Growth Fund will also create greater interest and support for those managers active in the SME lending market.”

It is expected that many businesses, large and small, will incorporate private debt into their funding strategies.

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