Private-credit firms are ending years of lenient underwriting practices as investor pressure forces them to raise costs and tighten lending terms. Blackstone and other major players are curbing sweeteners that once helped win deals in a hyper-competitive market.

Fund managers report increased scrutiny from investors, who have pulled billions from private-credit funds amid concerns over loan risks. The shift began around March and has accelerated, with executives noting a move from borrower-friendly to lender-friendly conditions.

Michael Arougheti, CEO of Ares Management, said the market noise and outflows reduced competitive pressure, allowing lenders to impose stricter terms. This marks a sharp reversal from the rapid growth period when firms competed aggressively for deals.

The tightening standards signal a fundamental market shift as private credit grapples with sustainability concerns and redemption pressures.