Sourcing Success: Finding Your Next Credit Opportunity

Private credit has emerged as a powerhouse in global finance, expanding from a $1 trillion market in 2020 to $1.5 trillion in early 2024. With projections reaching $2.8 trillion by 2028, the horizon for sourcing credit opportunities has never been more promising.

In this comprehensive guide, we explore the market drivers, sourcing strategies, sector opportunities, and risk considerations you need to build a resilient pipeline and unlock your next private credit opportunity.

The Private Credit Landscape in 2025

After years of steady growth, private credit continues to outpace traditional lending channels. Banks have tightened standards, creating a gap that private lenders are uniquely positioned to fill. Borrowers now value the speed, certainty and flexibility of private credit solutions, driving demand across middle-market companies, healthcare, and technology.

Meanwhile, private equity sponsors are flush with capital. Dry powder is at a private equity dry powder record high, fueling an upswing in deal activity. Against this backdrop, understanding market size and growth is crucial for calibrated sourcing.

Key Drivers of Growth

Several factors converge to propel private credit forward:

• Rate cuts and economic optimism boosting M&A activity
• Bank retreat creating demand for alternative lenders
• addressable market exceeds US$30 trillion across asset classes
• Sector-specific growth in healthcare and technology

These drivers highlight why lenders must stay agile. A lower cost of capital and management teams with positive outlooks will catalyze new opportunities in 2025.

Strategies for Deal Sourcing

To capitalize on growth, adopt a channel-agnostic approach to sourcing opportunities from both sponsor-backed and unsponsored channels. This dual focus insulates your pipeline from private equity market fluctuations.

Build and maintain relationships with banks, financial sponsors, and repeat borrowers to access proprietary deal flow. Complement traditional networks with modern tools that enable a data-driven deal sourcing process, screening thousands of companies efficiently and identifying patterns in successful deals.

• Channel-agnostic sourcing across sponsor and non-sponsor deals
• Sponsor vs. non-sponsor portfolio diversification
• Proprietary network and relationship building
• Data analytics and rapid screening
• Proactive outbound sourcing and outreach

Active outreach, leveraging social media platforms such as LinkedIn and X (formerly Twitter), ensures you’re first to hear about deals, rather than waiting for opportunities to land.

Opportunity Areas and Sectors to Watch

Certain industries offer particularly attractive dynamics for private credit:

• Healthcare financing for growing providers and seniors’ care
• Technology growth companies building next-generation platforms
• Infrastructure and real estate lending in asset-backed projects
• Asset-based finance, including investment-grade private placement debt
• Unsponsored deal segments requiring hybrid capital solutions

Middle-market borrowers, often underserved by banks, turn to lenders for growth capital, acquisitions, and recapitalizations. Capturing middle-market direct lending opportunities in these sectors can drive consistent returns as the broader market expands.

Managing Risk and Ensuring Credit Quality

Although private credit has shown resilience, heightened rates can pressure lower-quality credits. Monitoring asset quality, portfolio health, and expansion plans is essential to safeguard returns. Consistent underwriting standards, stress-testing cash flows, and active portfolio surveillance are the cornerstones of a robust risk framework.

Software, the largest sector by estimated universe, has seen more upgrades than downgrades so far in 2025, underscoring pockets of strength even amid market volatility. Maintaining a balanced mix of investment-grade and higher-yield opportunities will help manage total portfolio risk.

The Road Ahead: Integration and Growth

Institutional allocations to private credit continue to rise, with pension funds and insurers positioning it as a core income strategy rather than an alternative niche. The convergence of public and private markets opens new partnership models with banks, while ETFs democratize access for retail investors seeking diversified exposure.

Finally, a comprehensive deal sourcing process can be distilled into seven steps:

• Assemble a cross-functional sourcing team
• Define your sourcing strategy
• Compile a list of potential targets
• Conduct initial diligence to align with goals
• Shortlist businesses matching criteria
• Engage stakeholders at target firms
• Develop and execute deal advancement plans

By following these best practices—grounded in relationship building, data analytics, and proactive outreach—you’ll be well positioned to capture the vast opportunities in private credit.

As the asset class continues its upward trajectory, those who implement a holistic, adaptable sourcing strategy will discover their next credit opportunity and drive lasting success.