The private credit market is entering a more challenging phase, with non-accrual debt and other signs of borrower distress increasing. According to LCD data, reported non-accrual debt for US-based Business Development Companies (BDCs) rose to 1.9% of total debt at cost in Q1 2026, up 52 basis points from the prior quarter. When adjusted to count all debt owed by borrowers with at least one non-accrual tranche, exposure reached 3.3% in Q1, an increase of 116 basis points.

For the ten largest publicly traded BDCs, reported non-accrual debt climbed to 3.95% of total debt at cost in Q2, up 20 basis points from the prior quarter. Their adjusted non-accrual exposure for the period rose 54 basis points to 5.95%.