Private credit has been making headlines, with some calling this the “Golden Age” of the asset class. In a higher-rate environment, floating-rate loans have driven strong risk-adjusted returns, at times even surpassing private equity. This has attracted institutional investors who are rethinking traditional 60-40 portfolios and shifting towards alternatives that offer more resilient and less volatile returns. As the asset class grows, so do opportunities for early-career graduates. But what really is private credit?
If you’re exploring private credit investing, you might also find our distressed debt case study, LBO model or WSO modelling courses worth a look.
You often hear about M&A, investment banking, private equity, and venture capital, but private credit — now a $1.7 trillion asset class — has received less attention until recently. Private credit, particularly direct lending, involves non-bank financing for private equity-backed companies. Unlike traditional lenders that rely on assets as collateral, private credit funds often lend based on a company’s cash flows.
Before the 2007-2008 financial crisis, banks dominated corporate lending through syndicated loans and high-yield bonds. However, post-crisis regulations like Basel III forced banks to cut risk-weighted assets and reduce middle-market lending. This created a supply-demand imbalance, with demand for corporate lending far exceeding the estimated $400 billion in private credit dry powder. The recent struggles of major banks—such as the Citrix $8.55 billion loan syndication, which led to $700 million in losses—have further solidified private credit’s role as a key alternative lender.
Source: PitchBook
Private credit recruiting follows a process similar to private equity, with four to five interview rounds, including a case study and financial model test. Interviews cover technical, behavioral, and fit questions, but the technical focus is more debt- and credit-related.
Private equity recruiting typically starts earlier, while private credit hiring generally begins in late fall of an analyst’s second year. There are also more off-cycle opportunities.
Most candidates enter private credit through headhunters who reach out via email.
Large credit funds like Carlyle, KKR, Oaktree, and GSO use the same headhunters as private equity. Smaller funds (<$5B AUM) may post jobs online or use niche recruiters. When speaking with headhunters, be ready to explain why you’re choosing private credit over private equity.
The most common backgrounds for private credit candidates are:
If you’re not in one of these areas, lateraling into one first improves your chances. Corporate and commercial banking analysts struggling to land interviews often transition into LevFin before recruiting.
Unlike private equity, it’s common to see investment banking associates move into private credit.
Private credit firms assess candidates based on case interviews designed to test their ability to understand and build financial models, analyze credit metrics, and interpret financial covenants. Moreover, direct deal experience is highly valued. If candidates lack direct deal exposure, they are expected to demonstrate strong technical knowledge.
Funds that specialize in complex capital structures or distressed debt place additional emphasis on legal expertise. Compared to private equity, private credit provides fewer opportunities to add value through operational restructuring. Instead, success is driven by selecting and pricing deals correctly. As a result, firms prioritize candidates who can absorb and integrate information efficiently and present clear investment memos to committees.
For junior candidates, particularly those with limited deal experience or a commercial banking background, firms often administer model-building tests. These tests typically require candidates to create a three-statement financial model within two to three hours.
To prepare for private credit interviews, you must know your deals inside out. Expect questions like:
If you come from corporate or commercial banking, expect a deeper dive into your technical skills. Some interviewers assume these roles are less analytical than LevFin, so they’ll test your modelling skills more rigorously. You might want to check my post on private credit interview questions for more examples to help you prepare.
Most private credit interviews include a case study. It can be either a take-home assignment (common for off-cycle recruiting) or an in-person test (common for on-cycle recruiting).
You’ll receive a confidential information memorandum (CIM) or a presentation, plus supporting data like an industry report or financials. Over 2-3 days, you’ll build a presentation (Word or PowerPoint) covering:
You’ll then present your findings to the fund’s team, who will challenge your thesis and test how you handle scrutiny.
This follows the same structure but is much shorter. You’ll have 3-4 hours to prepare a 2-4 page memo and a simplified cash flow projection model (no full balance sheet).
The process mimics real credit underwriting, where you build an 80-page memo and present it to a bank’s risk committee. If your current role doesn’t involve credit underwriting, practice by analyzing a deal you’ve worked on and preparing a mock investment memo.
Some funds require a standalone modeling test, especially those investing across the capital structure. A typical test includes:
Funds focused on first-lien term loans may have simpler tests, but those with complex strategies expect deeper modeling skills.
Private credit is expanding rapidly, attracting investors and creating new career opportunities. While it shares similarities with private equity, the skill set required is distinct. To break in, focus on debt analysis, financial covenants, and credit structuring. If you’re interested in a stable, growing sector with strong returns, now is an excellent time to consider private credit.
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