How the OBBBA Is Reshaping the Private Credit Landscape
On July 4th, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law—a sweeping overhaul that touches tax codes, federal spending, and major social programs. Most early analysis has zeroed in on what these changes mean for private equity investors, especially given the eye-catching tax breaks and accelerated depreciation rules. Yet, the implications for private credit have flown largely under the radar.
When we launched a Credit vehicle in 2024, our goal was to stay ahead of the curve in this rapidly changing private credit landscape. As policy and macroeconomic shifts gain momentum, we’re seeing both fresh challenges and new avenues for growth in private credit that go far beyond what’s happening in the equity space.
This article examines these changes through the lens of private credit. We'll walk through the OBBBA provisions most relevant to private credit—not just how the law puts more cash in businesses’ hands, but also how it sets the stage for greater demand and capacity in our market. We'll also take a step back to look at the bigger picture, including how rising deficits and changes to the cost of borrowing could shape returns for private credit investors going forward. The new rules are set to affect far more than just tax bills—they’re set to change the playing field in ways every investor should understand and closely watch.
OBBBA’s Immediate Effects: More Cash, More Ambition
The OBBBA is poised to set off a real surge in business activity, and for private credit investors, this translates into a more active, varied pipeline of opportunities. At its core, the law acts as a catalyst in two principal ways: it puts more cash back into businesses, and it heightens incentives for growth and scaling—each carrying major implications for how and why companies seek credit.
Putting Cash in Companies’ Hands
A series of changes under the law—including EBITDA-based interest deductibility, immediate expensing for capital expenditures, expanded Section 179 limits, and the ability to expense all R&D immediately—now let companies unlock significant tax relief the moment they invest in growth. Where a purchase of new machinery or a major round of software upgrades once resulted in small tax benefits that were stretched over many years, the savings now arrive all at once. The same holds true for large R&D investments.
This kind of cash windfall does more than just improve the balance sheet. It gives companies options. Some might choose to pay down their private loans ahead of schedule. For private credit investors, that can be a positive development: many loans include early repayment fees, which help drive higher returns to investors. Other businesses might direct the extra liquidity right back into their businesses—expanding faster, funding new projects, or even pursuing acquisitions. Such moves often require fresh borrowing and contribute directly to stronger deal flow in the private credit market.
Sharpened Incentives for Growth
The updated rules for Qualified Small Business Stock (QSBS) make ambitious growth strategies even more attractive. Not only can a wider range of businesses now qualify for favorable capital gains treatment when owners eventually sell, but the potential tax savings themselves have grown meaningfully. The upshot: founders and investors have a significant financial incentive to pursue rapid scaling, acquisitions, and market entries. However, most don’t keep enough excess cash on hand to finance these bold moves alone. Traditional bank financing remains slow and often difficult to access, especially for businesses in transition or in high-growth mode. It’s here that private credit’s flexibility, speed, and tailored approach come into play, providing crucial funding support in this new environment.
The Longer Game: Costs, Competition, and Discipline
Beyond the immediate effects, OBBBA’s long-term influence on borrowing costs and the structure of the credit market is likely to become a defining factor for investors.
The federal debt ceiling has been raised by $5 trillion, signaling a period of elevated public borrowing ahead. When the government issues more debt, it competes with everyone else for investor dollars. As a result, the yields on Treasury bonds tend to rise, and since those yields are the foundation for pricing across all credit markets, companies will see higher borrowing costs across the board—including in private credit.
This isn’t just a theoretical risk; it’s already shaping how businesses and investors look at new deals. For some companies—especially those with marginal finances—higher costs may force a step back from new borrowing, slowing their appetite for debt. Conversely, for solid, cash-generating firms, the flexibility and certainty of private credit become more valuable when traditional lending options grow less attractive.
Private credit, importantly, typically relies on floating-rate structures. As base rates rise, so do investor returns—but higher borrowing costs can also push more companies closer to the edge. For those investing in private credit funds, this makes manager selection and underwriting discipline all the more essential. Investors have to look for managers who not only recognize opportunity in higher yields, but who are diligent and realistic about risk. In today’s market, applying rigorous underwriting, structures loans defensively, and actively monitors each position is a manager’s best shield against unwelcome surprises.
Final Thoughts
The OBBBA has ushered in an era of new possibilities—and new pressures—for business borrowers and private credit investors alike. Immediate tax changes are putting more dollars into company coffers and encouraging ambitious growth. In turn, the demand for innovative lending solutions is rising. Yet, the background is complicated: larger public deficits and the potential for persistently higher rates remind us that every opportunity must be weighed with an eye toward risk.
For private credit, success will require a careful mix of agility, discipline, and forward-thinking analysis. As the landscape continues to evolve, our approach remains rooted in experience and in real-time awareness of both the headwinds and the openings this new environment presents. Whether these changes will ultimately prove a boon or a challenge will depend, as always, on how well we adapt.
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