Corporate borrowers in America’s private lending market experienced their worst year on record in 2025, with failures reaching an unprecedented 9.2%, according to new data released Friday by Fitch Ratings.
The credit rating agency’s analysis examined 302 businesses carrying private credit obligations and documented 38 separate default incidents involving 28 different companies. This alarming figure surpassed the previous year’s already-troubling record of 8.1% in 2024.
Companies generating $25 million or less in annual earnings represented the largest portion of last year’s failures, with problems spread across multiple industry sectors, the research shows.
Fitch’s study focused predominantly on mid-sized enterprises earning $100 million annually or less, typically carrying approximately $500 million or less in total outstanding obligations.
The agency’s default calculations encompassed both formal bankruptcy proceedings and troubled debt restructuring agreements, where struggling companies negotiated modified payment terms with their financial partners.
These troubling statistics emerge during a broader market downturn affecting software companies, which represent a significant segment of private credit borrowing.
Interestingly, Fitch documented zero software sector defaults during 2025, though the agency clarifies it classifies software companies based on their primary target markets when relevant.
The majority of private credit arrangements featured variable interest rates connected to federal benchmark rates, which have remained elevated for three consecutive years. Fitch identified this factor as a primary driver behind last year’s surge in defaults.
“Capital structures in the PMR portfolio tend to be predominantly floating rate with minimal interest rate hedges in place,” the report’s authors wrote, referring to privately monitored ratings. “This leaves companies’ cash flow highly vulnerable to elevated rates.”
