Selecting a Private Credit Provider in 2025: Risks, Opportunities, and What to Look For
June 26, 2025
Introduction
The private credit market has soared to $2 trillion globally as of 2024, according to the IMF, offering investors a compelling alternative to traditional banking. This growth spans diverse asset classes, from trade finance—valued at $4.5 trillion USD in May 2025—to real estate and infrastructure, driven by the promise of higher yields (8%-12%), flexibility, and uncorrelated returns, as noted by McKinsey in 2024.
- For businesses, it addresses funding gaps, like the $2.6 trillion trade finance shortfall (ADB 2023).
- For investors, it diversifies portfolios beyond stocks and bonds.
However, this rapid expansion brings risks, as seen in recent failures like Greensill Capital and Stenn Technologies. This article guides you through the risks, opportunities, and key considerations for selecting a private credit provider in 2025, whether you’re deploying capital across asset classes or seeking financing.
The Appeal of Private Credit Across Asset Classes
Private credit’s allure lies in its ability to deliver attractive returns and diversification. Investors can achieve yields of 8%-12%, surpassing traditional fixed-income options, while benefiting from low correlation with public markets, per McKinsey’s 2024 analysis.
- Trade finance offers short durations (30-120 days) and regular payouts, ideal for quick returns.
- Real estate provides stable cash flows from rental properties, appealing to those seeking predictable income.
- Infrastructure supports long-term projects like renewable energy, offering stability over decades.
Market trends in 2025, including lower interest rates and declining default risks (Moody’s), have fueled this growth, alongside the trade finance gap that pushes SMEs toward alternative financing. This diversity allows investors to tailor portfolios, but the complexity of each asset class requires careful provider selection.
Key Risks in Selecting a Private Credit Provider
Choosing a private credit provider involves navigating several risks that can jeopardize investments or funding stability.
- Liquidity risks: A May 2025 Wall Street Journal report highlights over-reliance on bank loans, leaving providers vulnerable if funding dries up, as seen in Greensill’s 2021 collapse ($5.4 billion loss).
- Fraud and transparency issues: Stenn Technologies’ 2024 bankruptcy (£100 million shortfall) was linked to alleged money laundering, exposing operational opacity.
- Structural market risks: Valuation challenges in illiquid assets like real estate or trade receivables add uncertainty, as Proskauer noted in May 2025. These assets are hard to price accurately, increasing overexposure risk.
- Regulatory uncertainty: PwC’s May 2025 analysis points to inconsistent oversight across jurisdictions, enabling misconduct and complicating compliance. These risks underscore the need for thorough evaluation to protect capital and ensure reliable financing.
What to Look For in a Private Credit Provider
To mitigate these risks, investors and businesses must evaluate private credit providers based on several criteria.
- Strong risk management: Seek providers with conservative underwriting and diversified portfolios across asset classes—trade finance, real estate, or infrastructure—to minimize concentration risk. Incomlend, for instance, has financed over $1 billion in trade receivables with verified transactions.
- Transparency: Demand audited financial statements and clear reporting on portfolio performance, ensuring visibility into asset quality.
- Experience: Choose a provider with a proven track record across relevant sectors, such as Incomlend’s decade-long expertise in trade finance or a firm managing real estate loans.
- Liquidity mechanisms: Look for access to multiple funding sources and legal structures like bankruptcy-remote setups to protect investor funds. For investors deploying capital, additional factors are key:
- Alignment with goals: Ensure the provider matches your risk appetite—short-term gains in trade finance or long-term stability in infrastructure.
- Fee transparency: Demand a detailed fee structure to avoid hidden costs eroding returns.
- Exit options: Assess liquidity events like secondary market sales or structured repayments to ensure fund access. A provider offering credit insurance, as Incomlend does, further safeguards against credit risk across asset classes.
Critical Perspective and Recommendations
The narrative of private credit as a low-risk, high-reward frontier, as pushed by McKinsey in 2024, warrants caution. The $2 trillion market’s rapid expansion risks outpacing regulatory and operational frameworks, potentially leading to more failures like Greensill’s.
- Investors must conduct thorough due diligence: verify asset authenticity through independent audits, assess leadership governance, and diversify investments across providers and asset classes.
- Businesses should partner with providers like Incomlend, known for prudent scaling, multiple-source verification (e.g., post-shipping financing, buyer confirmations), and credit insurance. This approach ensures resilience, whether financing trade, real estate, or infrastructure projects, in a market projected to grow further in 2025.
Conclusion
Selecting a private credit provider in 2025 is a strategic decision in a $2 trillion market brimming with opportunities across trade finance, real estate, and infrastructure. While the appeal of higher yields and diversification is strong, risks like liquidity issues, fraud, and regulatory gaps demand careful navigation.
You can maximize returns and minimize exposure by prioritizing providers with strong risk management, transparency, experience, and liquidity safeguards, and aligning with your investment or business goals.
Incomlend exemplifies this approach with its robust trade finance solutions. Make informed choices to secure your financial future. Explore Incomlend’s offerings or similar providers to thrive in this dynamic landscape.
? Ready to explore more? Visit Incomlend to see how private credit is evolving.
