The Takeaway: A Q&A With Vieri Betti Guaraldi on the Growing Role of Private Credit in Italy’s Lending Market

What’s behind the explosive growth of private debt in Italy’s lending market?

The expansion of the Italian private debt market has been driven by a mix of structural shifts. Traditional bank financing, widely regarded as the bedrock of the Italian lending ecosystem, is becoming less accessible owing to stricter lending regulations under Basel III. This comprehensive regulatory framework has essentially tightened capital requirements and imposed stricter lending constraints, squeezing traditional credit channels and paving the way for private lenders to step in and bridge the widening funding gap.

In parallel, the Italian banking sector is undergoing a significant consolidation process, which is still underway. This dynamic, aimed at improving efficiency and resilience, has also led to a rationalisation of credit allocation—particularly to middle-market borrowers—further reinforcing the demand for alternative financing solutions.

Finally, regulatory developments over the past decade have created a more favourable framework for nonbank lenders, enabling a broader set of capital providers to operate and scale in the Italian market.

Reflecting the country’s growing prominence in the European private financing landscape, our recent MidCapMonitor report—which tracks middle-market European private-equity-sponsored debt activity—now includes a stand-alone section on Italy. In Q1 2025, the research found that credit funds accounted for nearly half of all qualifying transactions in Italy, with seven unitranche deals completed in the quarter alone. That figure already matches 50% of the total number recorded in all of 2024, highlighting the growing appetite among international credit funds and the increasing awareness of flexible capital solutions in a market traditionally dominated by banks.

What types of loans do credit funds typically focus on, and how are they contributing to the broader Italian economy?

Credit funds in Italy, like those in the rest of Europe, primarily focus on structured and higher-yield financing solutions such as unitranche loans, mezzanine financing, payment-in-kind instruments, and, in some cases, preferred equity. These types of loans are designed for businesses seeking tailored capital, especially in areas like M&A, growth financing, or turnaround situations, where traditional banks may struggle to provide the funding.

That said, credit funds tend to remain highly selective. They typically avoid certain sectors, such as nonessential retail, cyclical industrials, and construction, and rarely engage in nonsponsored deals, which means that today, their solutions are primarily accessible to private equity-backed businesses.

According to our MidCapMonitor, in Q1, LBOs represented approximately 57% of all private-equity-sponsored financings in Italy, signalling strong sponsor demand for private credit in acquisition scenarios. Refinancing and dividend recapitalisations made up the remaining 43%, reflecting a market still grappling with valuation mismatches due to macroeconomic uncertainty and a cautious M&A backdrop. This activity illustrates how credit funds are stepping in to keep capital flowing, even as traditional dealmaking slows.

How does private debt impact Italy’s corporate lending landscape, and what does its growth signify for businesses?

The rise of private credit has introduced greater flexibility into Italy’s corporate lending ecosystem. There’s no “one-size-fits-all” when it comes to lending, and each business has its own story and unique needs. That’s the beauty of private credit. It offers highly bespoke, flexible solutions that can adapt to the specific circumstances of each borrower. By doing so, credit funds are playing an increasingly instrumental role in supporting businesses and strengthening Italy’s economic fabric.

We’re also seeing increasing collaboration between credit funds and banks through hybrid structures that blend traditional lending with private debt elements. This trend allows businesses to optimise their capital structure—typically using cheaper, amortising bank debt for the senior portion, while leveraging private credit for the more flexible, higher-leverage tranche. The result is enhanced funding capacity with a tailored risk-return mix, supporting strategic optionality.

Does the rapid rise of private debt in Italy signal a permanent shift in how businesses access capital, or is this trend cyclical?

Private debt’s expansion in Italy reflects a lasting transformation rather than a short-term phenomenon—there is no question about that. As companies and investors become more familiar with alternative financing, and institutional capital continues to seek attractive, risk-adjusted returns, private debt will undoubtedly remain an integral part of the lending landscape. Our data shows that the seven unitranche deals completed in Q1 2025 alone are close to the total number of such deals completed in entire recent years, like 2023, 2022, and 2021, demonstrating the continued growth of the market.

Nonetheless, banks will likely continue to dominate traditional lending, particularly in areas where credit funds face structural limitations. However, the growing interplay between banks and private credit funds signals a maturing market where both financing models not only coexist but increasingly complement each other.

So, what’s The Takeaway?

Private debt has redefined the Italian lending market by filling critical gaps and providing innovative and tailored solutions that enable businesses, ranging from SMEs to large enterprises, to access essential capital. This growing presence signals a paradigm shift: Accessing capital is no longer solely dependent on bank relationships, but on a diversified and evolving funding ecosystem.

For businesses, investors, and policymakers, the key insight is clear: The future of lending in Italy is dynamic, competitive, and increasingly shaped by nontraditional players.