The American economy runs on two types of companies: the household names, and the thousands and thousands of businesses most people have never heard of but quietly make the economy go. For every tech giant commanding headlines, there are countless other companies solving problems you didn’t know existed, making products you never think about, and keeping entire industries humming along.
“I think it’s so fascinating, all these different companies that we finance, companies that you never would’ve thought of, or you never really know that exists, but play an integral part in our society, in our economic ecosystem,” said Kort Schnabel, CEO of ARCC and Co-Head of U.S. Direct Lending in the Ares Credit Group. “And you learn about these companies and how instrumental they are to the overall economy.”
These are private credit’s portfolio companies—the hidden engine of American business that rarely makes headlines. While critics debate private credit’s risks and complexities, they’re missing the fundamental story: these essential businesses have financing needs that traditional banking simply cannot meet.
That gap has left the need for a different kind of financing. While traditional banks act like middlemen—originating loans only to immediately sell them off to third parties—private credit lenders are making a fundamentally different commitment.
The contrast becomes stark when you examine what happens after a loan gets made. “If they go to a bank, the bank has to actually sell the loan,” said Schnabel. “Banks don’t actually hold large loans themselves. They sell them into the market, and to lots of different holders.”
Private credit’s promise is simpler, but profound. “When a borrower comes to us looking for a loan, we show that borrower the terms it’s going to have on that loan,” he said. “That borrower knows we are going to be the holder of that loan.”
This isn’t just about paperwork. When portfolio companies hit inevitable rough patches, we believe the difference between having a known partner versus a committee of strangers becomes existential.
“They trust us to act in a certain way when maybe the portfolio company is not performing according to plan,” said Schnabel. “And so that’s another reason why they might choose to work with us over working with a bank who’s going to sell that loan to a lot of parties that they don’t know.”
