Lending by private credit funds to software-as-a-service (SaaS) firms has grown rapidly and makes up a substantial share of funds' loan portfolios. Outstanding loans to SaaS firms increased from almost $8 billion in 2015 to over $500 billion, or 19% of total direct loans, by end-2025 (Graph B1.A).
By now, a third of private credit funds have extended loans to the SaaS sector, on top of their rising exposure to big US tech firms and other artificial intelligence (AI) companies (see Box A). In this box, we zoom in on business development companies (BDCs) to get a consistent picture of private credit lending to SaaS firms. BDCs are publicly traded and have quarterly disclosures. As such, they provide a window into the opaque private credit space. Moreover, BDCs account for one fifth of all direct loans in the United States and extended over 15% of their loans to SaaS firms in 2025.
Concerns that AI may disrupt traditional SaaS business models have led to notable price adjustments in the software sector. Software companies' stocks collapsed by almost 30% between October 2025 and February 2026 (Graph B1.B, red line), while BDCs' stock prices fell by about 10% on average (blue line). Meanwhile discounts to net asset value, which is largely determined by the book value of illiquid private loans, deepened (yellow line), potentially signalling worries about underlying valuations.
BDCs with higher SaaS exposure have underperformed their peers (Graph B1.C). Since October 2025, BDCs with high exposure to software firms have performed around 5 percentage points worse than those with low exposure. These developments highlight investor concerns that further advances in AI tools may disrupt the SaaS sector amidst redemption pressures from private credit's push towards retail investors.
The views expressed here are those of the authors and not necessarily those of the BIS or its member central banks. Globally, private credit stands at over $2 trillion; see F Avalos, S Doerr and G Pinter, "The global drivers of private credit", BIS Quarterly Review, March 2025. See I Aldasoro, S Doerr and K Todorov, "Retail investors in private credit", BIS Bulletin, no 106, 2025.