Uncovering Growth Credit: An Emerging Opportunity in Private Credit

In recent years, private credit has gained traction among both institutional and individual investors, with direct lending taking center stage. However, an emerging strategy within this space is growth credit, which provides debt financing to high-growth private companies often supported by minority venture capital or growth equity sponsors. Unlike traditional direct lending focused on larger deals with private equity-backed firms, growth credit involves smaller transactions averaging around $14 million and may include equity kickers like warrants.

Growth credit offers a distinct structure and borrower profile compared to its well-established counterpart. This strategy presents unique opportunities for diversification within a portfolio rich in private credit assets.

Understanding the nuances of growth credit can help advisors navigate its potential returns while managing associated risks effectively.