Australian private credit has expanded from a niche category to a dominant force in mid-market acquisition finance over the past five years. The combined assets under management across the major Australian private credit funds is now estimated to exceed $80 billion, most of it deployed into transactions in the $5M to $50M range that fall outside major bank appetite. This expansion has been the most significant structural change in Australian commercial lending of the past decade.
It has also, until recently, been a tailwind for acquisitive operators. Private credit has typically priced acquisition senior debt at 100-300 basis points above major bank pricing, a premium operators have been willing to pay for the speed, structural flexibility, and certainty of execution that private credit delivers.
That premium is now widening.
What we're seeing
Across our active engagement pipeline, we're seeing three converging shifts:
First, private credit funds are repricing their senior debt facilities upward by 50-100 basis points. The cost differential between major bank and private credit has expanded from 100-300 basis points to 200-400 basis points across most categories.
Second, structural terms are tightening. Covenant packages that were relatively flexible 18 months ago are returning to more conservative levels. Equity contribution requirements have increased by 5-10 percentage points across most facility categories. Drawdown flexibility has narrowed.
Third, decision timeframes are extending. The 24-48 hour conditional approvals that distinguished private credit from major bank lending are now more commonly 5-7 days. Final settlements are taking longer.
These are not catastrophic shifts. The category is repricing toward sustainable risk-adjusted returns, which is healthy for the long-term capacity of the market. But for operators currently planning acquisitions on the assumption that private credit pricing and terms remain at 2024 levels, the implications are material.
Three implications for operators planning 2026 acquisitions
Operators currently structuring acquisition finance for transactions in the next six months should adjust their planning in three specific ways.
One (Model facilities with current pricing, not 2024 pricing. Most acquisition models we see still use private credit pricing assumptions from 12-18 months ago. The current pricing reality compounds across acquisition cashflow models meaningfully. A 75 basis point uplift on a $15M senior facility costs $112,500 annually) enough to change facility viability in marginal transactions.
Two, Plan for longer settlement timelines. Acquisitions that were comfortably structured in 6-8 weeks 18 months ago are now realistically 8-10 week timelines through private credit. For operators with tight settlement dates, this requires either earlier engagement or alternative lender categories.
Three (Re-examine major bank appetite.Some major banks are now competing more actively for mid-market acquisition finance than they were 18-24 months ago, partly in response to private credit's expansion. For operators with strong cashflow and recognisable brands, major bank acquisition finance has become more available and meaningfully cheaper than the private credit alternative. The right lender depends on the deal) but the major banks should be on the shortlist again for the right transactions.
What this means for capital structure design
The broader implication of these shifts is that capital structure design becomes more important as pricing differentials widen. When private credit prices at 100 basis points above major bank, the structural sophistication of the facility matters less, the marginal cost is contained. When that differential expands to 400 basis points, the structural design needs to justify the premium.
That means three things for the operators we're working with:
“When private credit prices at 400 basis points above major bank, the structural sophistication of the facility has to justify the premium. That's a higher bar than the market has needed to clear in five years.”
Layered capital stacks become more economically attractive. Where vendor finance, asset-backed facilities, and senior debt can be layered to reduce average cost of capital, the case for the additional structural work compounds.
Major bank presentations need to be more sophisticated. Operators presenting to major banks for acquisition finance need credit narratives that go beyond historical cashflow analysis. The lenders that are competing again for acquisition mandates are looking for sophisticated structures and sophisticated presentation.
Engagement timelines need to start earlier. The operators we're working with on 2026 acquisitions are now beginning capital architecture work 3-6 months before transaction execution, not 1-2 months. The lead time creates optionality. The compressed timeline costs it.
Where we're directing acquisitive operators
For the operators we're advising on 2026 acquisitions, our current direction is shaped by transaction profile.
For transactions under $5M with strong cashflow profiles and recognisable industry positioning, we're directing toward major bank acquisition divisions and second-tier banks where the pricing advantage is most significant.
For transactions $5M-15M, we're running coordinated processes across both major bank and private credit channels, allowing the deal to find the right lender rather than assuming the lender category from the outset.
For transactions $15M+ or with structural complexity (multi-entity, cross-border, non-conforming sectors), private credit remains the primary channel, but with more emphasis on structural sophistication and earlier engagement to absorb the longer timeline.
Closing observation
Private credit's repricing is healthy for the long-term capacity of the Australian acquisition finance market. The category needed to find sustainable risk-adjusted returns, and the current repricing is that adjustment in progress.
For operators planning acquisitions over the next 6-12 months, the implication is that the acquisition financing landscape requires more thought than it did 18 months ago. The structures that worked at 2024 pricing assumptions don't work as cleanly at 2026 pricing reality. The right lender for a given transaction is less obvious than it was. The structural design matters more.
We're working through these decisions actively with our acquisition-stage clients. The market is more interesting than it has been in some time.