The Rise of Private Credit and the Need for Flexible Loan Servicing

In the wake of changing market dynamics, the corporate lending landscape has undergone a profound transformation. Craig Boardman, a Director in the product organisation at Finastra with approximately 30 years of experience in financial technology, discussed how the structure of debt financing has shifted significantly over the past two decades. Traditionally, private equity acquisitions were funded almost exclusively by commercial banks. However, following the 2008 financial crisis, stricter regulatory constraints left banks unable to lend to highly levered or what were considered risky companies. This regulatory gap led to the rapid rise of private credit funds, which stepped in to provide vital debt financing for these transactions.

This market shift has introduced a substantial operational challenge: the sheer complexity and bespoke nature of private credit agreements. Unlike standardized corporate loans, private credit transactions are highly customized and frequently feature complex mechanisms like “payment in kind” (PIK), which allow borrowers to defer cash interest payments and instead increase the principal loan balance. Traditional, rigid software systems struggle to track these unique debt instruments accurately, causing operational headaches and increasing risk for lenders. To remain competitive, lenders must move away from these inflexible platforms and adopt infrastructure that can seamlessly handle highly customized deal structures while ensuring accurate reporting for investors.

Finastra addresses this industry-wide challenge through Loan IQ, a platform that has served the market for over 30 years. Long before the post-crisis boom in private credit, banks were already executing highly bespoke corporate loans. Consequently, Loan IQ’s core functionality was built from the ground up to handle the most intricate credit assets, making it an established industry benchmark for servicing and syndicating loans, regardless of their underlying complexity.

By providing unmatched technical flexibility, Loan IQ gives lenders a distinct competitive advantage. Rather than forcing complex agreements into rigid systems or relying on manual, error-prone workarounds, institutions can utilize a single, unified platform capable of managing syndicated loans, private credit, asset-based lending, and commercial real estate loans simultaneously. This operational versatility removes risk from daily processes, resolves systemic headaches, and ensures that lenders can confidently execute any bespoke deal structure the market demands while maintaining flawless data integrity for their investors.

Click the following link to downlaod the full report here: https://www.finastra.com/viewpoints/report/rise-private-credit-corporate-lending?utm_source=linkedinp&utm_medium=social&utm_campaign=WP-TL-LD-LoanIQ-FFNews

Key Highlights from Craig Boardman:

• The Evolution of Debt Financing: Boardman outlines how private credit funds stepped in to fill the corporate lending gap after post-2008 regulations restricted bank lending to highly levered companies.

• The Challenge of Bespoke Features: Why modern credit assets require specialized tracking due to complex, custom features like payment-in-kind (PIK) structures.

• Overcoming Software Rigidity: Traditional software systems are too rigid to manage private credit instruments, leading to increased operational risk and reporting challenges.

• An Industry Benchmark: Loan IQ leverages over three decades of functionality to handle any debt instrument, from standard syndicated loans to the most complex asset-based and real estate deals.

• Mitigating Operational Risk: How a flexible servicing platform removes daily operational headaches and protects capital by ensuring accurate investor reporting.

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