Private Credit: The UK CFO’s Capital Structure Playbook for 2026
Private credit is now a mainstream capital structure tool for UK CFOs. With the Bank of England base rate at 3.75% and 74% of UK CFOs still viewing debt as costly relative to historic norms, private credit markets are growing to fill the gap left by constrained bank lending — and CFOs who understand how to access and govern this market will hold a structural financing advantage in 2026.
Why Has Private Credit Become a CFO Priority in 2026?
Private credit — direct lending, unitranche facilities, mezzanine debt and asset-backed lending from non-bank lenders — has grown from a niche asset class into a mainstream financing route for mid-market and large UK companies. According to Morgan Stanley’s 2026 private credit outlook, asset yields on directly originated first-lien loans are expected to settle in the 8.0–8.5% range — still attractive to lenders, but increasingly competitive with traditional bank syndicated debt for well-structured deals.
The drivers are structural. Banks remain constrained by Basel III capital requirements and are more selective than before the 2022 rate cycle. Meanwhile, private credit funds entered 2026 with record dry powder. According to Macfarlanes’ February 2026 analysis of private capital markets, the UK is heavily dependent on overseas investors for private market financing, making UK corporate access to this capital pool a strategic variable in its own right — particularly as geopolitical volatility affects dollar-denominated credit markets.
For CFOs, the practical implication is that private credit is no longer a financing option of last resort. It is a first-choice route for specific transaction types: leveraged buyouts, carve-out financing, growth capital for businesses with strong recurring revenues, and bridge facilities ahead of public market refinancing.
Executive Action:
- Map your next 18 months of financing needs — capex programmes, refinancing windows, M&A pipeline — and identify where private credit offers better terms or greater certainty than bank debt or public markets.
- Brief the board treasury committee on private credit as a standing financing option, not a contingency. Require your finance team to maintain active relationships with at least two private credit providers.
- Use the INFORMD Capital Approval Assessment template to structure the internal approval process for any private credit facility.
How Should CFOs Assess Private Credit Against Bank Debt?
Private credit is not simply more expensive bank debt. The comparison requires a total cost of financing analysis — not just headline interest rate, but arrangement fees, covenant structure, flexibility on prepayment, certainty of execution, and speed to close. Private credit lenders typically offer greater covenant flexibility and faster execution than syndicated bank markets, which is particularly valuable in time-sensitive M&A or carve-out transactions.
According to the Bank of England’s Financial Policy Committee record from April 2026, while the era of near-zero rates is unlikely to return, the trajectory is for gradual further easing. This creates a specific CFO calculation: floating-rate private credit facilities entered today will benefit from rate reductions over their term, while the covenant flexibility may offer value that outweighs the initial rate premium over public investment-grade markets.
The governance obligation is equally important. Private credit lenders typically require more detailed covenants and information rights than public markets. CFOs must ensure their financial reporting infrastructure can meet quarterly lender reporting obligations, maintain headroom on leverage and interest coverage covenants, and provide timely notice of material events. Covenant breach in a private credit facility triggers faster lender escalation than in broadly syndicated markets — there is no market mechanism to absorb a technical breach quietly.
Executive Action:
- Build a total cost of financing model that captures not just coupon rate but all-in cost including fees, covenant restrictions and operational reporting obligations.
- Assess your finance function’s capacity to support private credit covenants — quarterly reporting, leverage tests, cash flow projections — before committing to a facility.
- Negotiate information rights symmetrically: understand what the lender can demand and under what circumstances before signing.
What Are the Board Governance Requirements for Private Credit?
Under the UK Corporate Governance Code and the Companies Act 2006, the board retains ultimate responsibility for capital structure decisions. Private credit facilities — particularly unitranche deals or facilities with payment-in-kind (PIK) elements — require board-level approval and should be presented with a clear risk assessment, not just a commercial rationale.
The key governance questions boards should require the CFO to address include: What is the maximum leverage the business can service under a downside scenario? What covenants apply and what is the cure mechanism if they are breached? What are the change of control and refinancing provisions, and how do they interact with the board’s strategic options? Is the lender likely to be a stable counterparty over the facility term, or is secondary market transfer a risk?
The FCA has also increased its supervisory attention to private credit market risks, with the Financial Policy Committee noting in April 2026 that a tightening of supply from private market financing could affect UK corporate borrowers, especially in stressed market conditions. Boards of FCA-regulated firms should ensure their treasury policies reflect this systemic risk assessment.
Executive Action:
- Update your treasury policy to include explicit parameters for private credit: maximum allocation, acceptable lender types, minimum headroom requirements.
- Require board approval — not just CFO sign-off — for any private credit facility above a defined materiality threshold.
- Brief your Audit Committee on private credit covenant accounting treatment, particularly where PIK instruments affect leverage ratios or where fair value measurement is required under IFRS 9.
How Should CFOs Structure Their Engagement With Private Credit Markets?
The private credit market is not homogeneous. There are meaningful differences between direct lenders focused on the mid-market (typically £20m–£200m facilities), larger unitranche providers competing with investment-grade syndicated markets, and specialist lenders in sectors such as infrastructure, real estate and technology. CFOs should target their relationship-building to the segment most relevant to their business profile.
The 2026 M&A environment — which EY describes as the “Year of the Carve-Out” — creates specific opportunities for private credit as a financing tool. Carve-out transactions often require committed, flexible financing that can close quickly and accommodate the uncertainty of a business being separated from its parent. Private credit lenders with relevant sector experience are typically better positioned to underwrite this risk than public market investors.
CFOs should also monitor the emerging regulatory landscape. The UK Treasury has received parliamentary scrutiny of private credit market risks, and the FCA is expected to develop enhanced supervisory expectations for UK-regulated investors in private credit funds. While these requirements fall primarily on fund managers, corporate borrowers may face more rigorous due diligence processes as lenders respond to regulatory pressure.
Use the INFORMD executive briefing library to track FCA and Bank of England guidance on private credit regulation as it develops in H2 2026. For broader capital allocation governance, access the executive self-assessment tools.
Frequently Asked Questions
Private credit refers to direct lending and other non-bank debt instruments provided by asset managers and credit funds. UK CFOs are using it because banks remain constrained by capital requirements, private credit funds hold record dry powder, and private lenders offer faster execution and more flexible covenants than public debt markets.
On headline rate, private credit often carries a premium over investment-grade bank debt. However, the total cost of financing comparison must include arrangement fees, covenant flexibility, certainty of execution and speed. For time-sensitive deals like carve-outs or leveraged buyouts, private credit’s all-in value often matches or exceeds syndicated alternatives.
Under the UK Corporate Governance Code and Companies Act 2006, the board retains responsibility for material capital structure decisions. Private credit facilities above a defined materiality threshold require board approval with a formal risk assessment covering leverage covenants, downside scenarios, change of control provisions and lender counterparty risk.
The Bank of England’s Financial Policy Committee noted in April 2026 that a tightening of private credit supply could affect UK corporate borrowers, particularly leveraged companies reliant on overseas investors. CFOs should stress-test their private credit facilities against a scenario of reduced credit availability and higher refinancing costs.
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