Bitcoin · Federal Reserve (FED) · CryptoSlate
Banks are owed $349 billion by private credit funds that may not be collecting cash from borrowers
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Private credit funds can count interest as income even when the borrower hasn't sent them any cash, because some loan contracts let businesses add interest to what they owe.
Key facts
- By early 2026, about 10% of BDC loans were actively using payment-in-kind interest (PIK), up from about 6% in 2022
- US-domiciled private credit vehicles owed banks $349 billion at the end of 2025, while other research showed borrowers were paying interest with additional debt
- Within the US-domiciled group, business development companies (BDCs) owed banks $181 billion at the end of 2025
- According to the Fed's Oct. 16 account of the market, private credit vehicles with a US footprint currently hold more than $2.6 trillion in assets, including foreign-based vehicles
Summary
01 Banks remain deeply exposed to private credit despite lending moving outside traditional banking. 02 Rising payment-in-kind interest creates a gap between reported income and available cash. 03 Bank financing pressure could force funds to sell assets, with potential spillovers into Bitcoin. That gives a company more time to pay, but it doesn't extend the same courtesy to the fund, which could have borrowed money from a bank to finance the loan.