Private credit covers several distinct lending strategies, and each has its own purpose, risk level, and expected return.

Let's take a quick tour of the most common categories.

Direct lending is the backbone of private credit.

Here, lenders provide senior loans directly to companies.

These loans often support acquisitions, expansions, or refinancing. Mezzanine financing sits below senior debt and carries more risk, but usually comes with higher returns. In some cases, lenders receive warrants or other forms of equity upside. Distressed credit focuses on companies experiencing financial difficulty. Lenders in this space look for opportunities to provide capital where traditional financing options aren't available. Special situations include lending around unique events, such as spin-offs, restructurings, new product launches, or major strategic shifts.

These deals require flexible and creative solutions.

Venture debt supports early-stage companies, often those backed by venture capital investors.

These loans carry higher risk because the companies are usually pre-profit and rapidly growing. Finally, real estate and infrastructure debt both focus on physical assets. Real estate debt is backed by property, while infrastructure debt supports essential assets like energy, transportation, or communications.

These strategies can offer stable and predictable cash flows, and each approach plays a different role in the broader private credit ecosystem.