In private credit, deals are often classified as sponsored or non-sponsored. These two categories have different characteristics, and understanding them helps explain how the market operates. Sponsored lending takes place when a private equity firm owns the company that's borrowing the money. This approach dominates the market.

From 2010 to 2025, 75% to 85% of private credit deals per year were sponsored transactions.

The presence of a private equity sponsor can provide extra comfort to lenders because the PE sponsor has a vested interest in the company performing well, since they are also invested in it, meaning they typically support the company with strategic guidance and operational expertise. The PE sponsor also conducts extensive due diligence and builds detailed profitability forecasts for the company themselves before investing, all of which can be used by private credit funds without having to do this for themselves. Non-sponsored lending involves lending directly to companies without a private equity backer. These borrowers might be entrepreneur-owned businesses or companies with long-standing management teams.

Because there's no sponsor, lenders need to dig deeper before agreeing to provide financing, carrying out their own more detailed due diligence, and the deal process often takes longer.

Finding these opportunities also requires more extensive relationship networks because the companies aren't already plugged into the private equity ecosystem.

Both sponsored and non-sponsored lending have their place in the market, but each comes with a different balance of risk, information, and deal complexity.