Higher funding costs are tightening the squeeze on private credit funds, as banks raise leverage terms and investors demand steeper spreads. JPMorgan data shows the premium investors require has climbed 0.34 percentage points this year and 0.83 points since early 2025, reflecting worries over loan quality in a $2 trillion industry.

Bond issuance by business development companies fell 22% year‑on‑year to about $6.8bn in Q1 2026, while some funds turned to shorter‑dated bonds to curb interest burdens. Blue Owl’s recent $400mn two‑year bond sale to Pimco bypassed a broad market, a tactic more common in junk finance, aimed at reducing execution risk.

Goldman Sachs Private Credit tapped the market for $750mn of debt, agreeing to a floating spread of 2.55 percentage points over Treasuries—more than double the cost of comparable triple‑B corporate debt. With banks charging more for new facilities, managers are shifting toward structured credit and CLOs, as illustrated by Blackstone’s $450mn CLO raise that shaved its borrowing rate. The funding scramble is forcing the sector to rethink its financing mix.