Staying vigilant

December 11, 2023

As we round out the year, there's been no shortage of predictions for 2024, including from us in our most recent private credit outlook. Most calls for an outright recession have faded but there is an undertone of volatility and general market uncertainty that is permeating throughout. Any market volatility will impact private credit for both good and bad as borrowers will be more inclined than ever to need to raise debt capital but defaults will inevitably rise as well.

Private credit loans in general already tend to default and go into workout more frequently than those who don't use the private credit market, as seen in this PitchBook report. Our pipeline is filled with corporate debt borrowers which carry inherently more risk than our asset-backed deals in a time when we can't afford to have defaults hit the platform as it'll undo all the good work we've done this quarter. As we've experienced in the past, any type of default locks up endless hours of resources, racks up high legal expenses, and shakes the confidence of our investors. More than ever before, we need to maintain our tight underwriting requirements in order to minimize the risk of defaults, especially if we want to hit our growth targets in 2024. 

The key to success next year is simple - build and convert our underwriter and borrower pipeline, establish trust with our current and new investors, and ensure we mitigate risk as best we can. If we can do these three things, we're going to have a stellar year