Can I Borrow That?

The primary business of a bank is accepting deposits and making loans, frequently using the money from the deposits to make the loans. If, for whatever reason, many depositors want their deposits back, the bank has a problem, not only because that money might be invested in the loans (the bank run that happened to SVB a few weeks ago) but also because the bank is no longer in the position to provide loans.

This is happening in the current global banking crisis. As banks are facing increasing scrutiny, fewer loans are being granted, and the criteria become much more stringent, with consequent delays and inefficiencies. At the same time, borrowers that rely heavily on banks for their liquidity needs might want to have diversified sources of liquidity. Direct lending funds are standing to benefit from the current environment.

Direct lending refers to the practice of providing loans mainly to companies without intermediaries such as investment banks. These loans are originated and held by the lender, instead of broadly syndicated. Lenders focus on the top of the capital structure, investing primarily in senior secured first-lien debt. Albeit already present, this strategy grew substantially after the 2008 financial crisis, as commercial banks could no longer lend to middle-market and lower-middle-market companies due to new regulations and economics.

There is still a significant amount of dry powder in direct lending, according to Prequin data. In the 10-year period between 2012 and 2022, the mid-market private debt dry powder more than tripled, from USD 40bn to USD 145bn. The dry powder has grown in line with the overall private credit market, which over the same period has increased from USD 340bn to USD 1340bn. The

Direct lending has traditionally focused on mid-sized businesses and has, in recent years, expanded into larger buyout financings. The current bank crisis gives private credit funds the opportunity to expand into smaller businesses as well as consumer loans.

Venture companies are another market of interest for direct lending funds. Start-ups were particularly hit by the SVB crisis, as it was the bank of choice for most of the venture community, and these companies still have liquidity needs.

Private debt funds are showing that they are open to discussing deals and terms, and this is giving confidence in a market that would otherwise be much less liquid.

We thank you for your continued support.

The FAM team


Subscribe to our “Weekly Thoughts” mailing list and receive the latest posts by email every week.

Newsletter Form

By clicking the Subscribe button you agree to our Privacy Policy


The Weekly Thoughts are for general informational purposes only. They do not constitute a recommendation, an offer or solicitation to buy, or to sell, or to engage in any other transaction involving any financial instruments, or to adopt any investment strategy. Furthermore, they do not constitute legal or tax advice.

The Weekly Thoughts are not addressed to any person or entity in any jurisdiction where this may be or may be deemed to be unlawful.

Past results are not a guarantee of future results and are for illustrative purposes only. Personalized and professional advice should be sought prior to taking any investment decisions. Any decision based on information contained in the Weekly Thoughts lies in the sole responsibility of the reader. Although the Weekly Thoughts are based on information that Fairway Asset Management AG considers to be reliable, it does not guarantee that the content is accurate, up-do-date or complete.

If you have any questions, please contact

Fairway Asset Management AG
Claridenstrasse 34
8002 Zürich – Switzerland
+41 44 552 97 30