There is a simple reality that policymakers and market advocates have yet to fully accept: Irish companies do not want to list.
For years, the response has been to tweak incentives and repackage reliefs in the hope that founders might reconsider. So the market has adapted: if companies will not go public, then capital will go to them. Private credit has stepped into that gap with speed and scale.
It is becoming a core part of the funding stack for growing companies
Talk to dealmakers in Dublin and there is a clear view forming. Private credit is no longer just a useful adjunct to bank lending but becoming a core part of the funding stack for growing companies. For businesses that want to scale but have no interest in an initial public offering, it offers a viable path.
It allows companies to raise significant capital without diluting ownership. It also avoids the disclosure and governance burden that comes with listing.
There is a structural driver behind the rise of private credit. Since the financial crisis, banks have been constrained by regulation and their own risk appetite. That has left gaps in areas such as leveraged lending and growth finance. Private credit funds have stepped in to fill them, often with greater flexibility on terms and structure.
It also gives yield-chasing investors access to fast-growing companies. If more investors could support Irish businesses this way, helped again by some incentives, then it’s a win-win for everyone.
The downsides
Private credit works well in benign conditions. It is less tested when the cycle turns. By design, it is taking on risk that traditional lenders have chosen to avoid.
The first pressure point is cost. Much of this lending is more expensive than the listing route. For companies that have used private credit to fund expansion, higher debt servicing costs can quickly erode margins and restrict flexibility. What once looked manageable can become tight very quickly.
When conditions shift, the adjustment can be more abrupt than many expect
The second is discipline. In a competitive market, lenders have been willing to offer borrower-friendly terms to win deals for the really desirable startups. Covenants have been looser and structures more accommodating. That works on the way up. In a downturn, though, those same lenders can tighten quickly. Terms can be revisited and expectations reset, often at short notice.
There are already early signs of strain. Parts of the market that attracted heavy private credit funding, particularly in technology and software, have seen valuations come under pressure. That does not automatically translate into losses, but it does challenge some of the assumptions that have underpinned recent lending and raises questions about future performance.
For investors, private credit has often offered returns above public markets, with the added benefit of lower reported volatility. That stability is, in part, a function of opacity. Assets are not marked to market in real time. When conditions shift, the adjustment can be slower and more abrupt than many expect.
Liquidity is the other constraint. Capital is typically locked in for longer periods. That is manageable when performance is strong. It becomes more problematic if investors want to exit or rebalance in weaker markets, particularly if confidence starts to fade.
It is not a substitute for public markets, and not without risk
And that is what we have begun to see. Several major funds have moved to limit investor redemptions. There are also growing concerns about exposure to sectors such as software, where valuations have softened and where developments such as AI are introducing new uncertainties around long-term business models.
A useful extra
None of this undermines the central point about the usefulness of private credit. In many cases, it is providing funding to businesses that might otherwise struggle to access capital. It is supporting growth and replacing a public market that no longer serves smaller companies well.
But it is not a substitute for public markets, and it is not without risk for any of the participants involved.
For companies, it can mean higher costs and less room for error if conditions deteriorate. For lenders, it means exposure to more complex and potentially weaker credits. For investors, it means accepting illiquidity and the possibility that risk has been underpriced.
Private credit is part of the answer to the listing problem. It is not the answer.
