Private credit undercuts bank debt by 275 bps for growth borrowers

A new Yanne Capital research paper says private credit is now pricing 275 basis points inside syndicated bank debt for growth-stage borrowers with recurring revenue. The shift could reshape how founders model financing, because structure and covenant terms now matter as much as headline pricing.

Why it matters: - Private credit is no longer just the faster option for growth borrowers. The pricing gap has flipped, which could change how founders choose between direct lenders and banks. - A lower headline coupon does not guarantee a cheaper deal. Covenant flexibility and prepayment terms can add meaningful hidden cost. - Founders approaching a capital event in the next 18 months may need to model more than one financing path to avoid mispricing their leverage options.

What happened: - Yanne Capital released a research paper, Capital Structure 2027: Founder Forward Plan, on Oct. 7, 2026. - The paper says private credit is pricing 275 basis points inside comparable syndicated bank debt for growth-stage borrowers with recurring revenue. - Yanne Capital says direct lenders are winning approvals at SOFR plus 475 to 525 for borrower profiles that syndicated banks are pricing at SOFR plus 750 to 800. - The firm says the spread gap has widened for eight straight months.

The details: - Private credit assets under management crossed $1.7 trillion in the first half of 2026, according to PitchBook. - Yanne Capital argues deployment pressure inside private credit funds is now driving pricing more than the cost of capital. - The paper says banks remain constrained by Basel III endgame capital treatment on leveraged exposures, which has reduced balance-sheet capacity for this borrower class. - Yanne Capital says incurrence-based covenant packages are replacing maintenance tests in roughly two-thirds of growth-stage unitranche facilities it evaluates. - A 102-101 par call schedule on a five-year facility can cost a growth borrower 175 to 225 basis points of effective yield if the company refinances or gets acquired in year two, the paper says. - S&P LCD comparable data shows call-protection creep has added about 40 basis points of realized cost across the growth-borrower cohort since 2024. - Debt service coverage, not debt-to-EBITDA, is now the more important metric, according to the paper. - Yanne Capital says a 1.5x debt service coverage cushion at close can withstand a 20% revenue decline. - A 1.15x cushion, which the firm says appears in the tightest committee approvals this year, would not. - Bloomberg DCM issuance data shows growth-borrower revolver volumes are down year over year while term loan B issuance from the same borrower class is up.

Between the lines: - The price inversion suggests private credit lenders are competing more aggressively for growth borrowers than many founders may expect. - The real negotiation may now be over flexibility, call protection and covenant structure, not just the interest rate. - Bank optionality is narrowing as appetite for growth-stage revolvers, especially SaaS lending tied to ARR rather than EBITDA, becomes concentrated among a small group of active lenders. - Founders who anchored to 2024 bank-first pricing could be carrying an outdated benchmark into 2027.

What's next: - Yanne Capital says founders within 18 months of a capital event should model three capital structures in parallel: a private credit unitranche, a bank revolver plus junior debt, and an equity-heavy option with minimal leverage. - The firm expects companies that secure revolving credit facilities with relationship banks in the next three quarters to preserve more optionality than borrowers coming to market later in 2027. - Founders are being advised to enter capital-structure talks with a clear debt service coverage target rather than relying mainly on debt-to-EBITDA.

The bottom line: - For growth borrowers, cheap-looking debt may no longer be the cheapest debt. The new advantage belongs to founders who model structure, covenants and refinancing risk as carefully as the coupon.