Middle-market credit in mid-2026 prices wide by size and narrow by risk: senior bank debt for a sub-$10m EBITDA borrower runs S+350 to 425 while blended junior capital runs 13.00% to 16.00% (SPP Capital Partners, July 2026).
Leverage for the smallest borrowers has contracted roughly half a turn of senior capacity year on year (SPP, July 2026), while measured stress remains moderate: the Proskauer Private Credit Default Index reads 2.51% for Q2 2026 and KBRA's rated-borrower median interest coverage holds at 1.6x (both published 28 July 2026).
Private performing credit yielded 9.97% in Q2 2026, up from 9.70% the prior quarter (Houlihan Lokey, Private Performing Credit Index).
What are middle-market loan spreads right now?
For a borrower below $10m of EBITDA, senior bank cash-flow debt prices at S+350 to 425 and senior non-bank or unitranche debt at S+550 to 750; blended junior capital and mezzanine runs 13.00% to 16.00% all-in (SPP Capital Partners, July 2026). In the core middle market, second lien prices at S+725 to 825 and subordinated debt at 11.0% to 13.5% all-in (Lincoln International, as of 1 May 2026). Original issue discount adds cost outside every quoted margin, at 98.0 to 99.0 on new-issue facilities below $20m of EBITDA (Houlihan Lokey, as of 30 April 2026).
| Metric | Latest quarter | Prior quarter | Source |
|---|---|---|---|
| Senior commercial bank cash-flow debt, below $10m EBITDA | S+350 to 425 | SPP Capital Partners, Market At A Glance, July 2026 | |
| Senior non-bank and unitranche, below $10m EBITDA | S+550 to 750 | SPP Capital Partners, Market At A Glance, July 2026 | |
| Junior capital and mezzanine, cash and PIK together, below $10m EBITDA | 13.00% to 16.00% | SPP Capital Partners, Market At A Glance, July 2026 | |
| Second lien term debt, $15m to $40m EBITDA | S+725 to 825 | Lincoln International, Private Credit Snapshot, as of 1 May 2026 | |
| Subordinated debt, all-in, $15m to $40m EBITDA | 11.0% to 13.5% | Lincoln International, Private Credit Snapshot, as of 1 May 2026 | |
| Preferred equity, $40m to $100m EBITDA | 13.5% to 16.5% | Lincoln International, Private Credit Snapshot, as of 1 May 2026 | |
| Original issue discount, new-issue first lien and unitranche below $20m EBITDA | 98.0 to 99.0 | Houlihan Lokey, as of 30 April 2026 |
How much leverage will lenders provide?
Senior debt for a borrower below $10m of EBITDA clears at 2.00x to 2.50x of EBITDA and total debt at 2.50x to 3.25x; above $25m of EBITDA the bands widen to 4.25x to 5.25x senior and 5.00x to 6.50x total (SPP Capital Partners, July 2026). The small-borrower bands have contracted from 2.00x to 3.00x senior and 2.50x to 4.00x total a year earlier. Lenders state a minimum 40% base equity capitalization, with at least 60% of it in new cash (SPP, July 2026).
| Metric | Latest quarter | Prior quarter | Source |
|---|---|---|---|
| Senior leverage, below $10m EBITDA | 2.00x to 2.50x | 2.00x to 3.00x (July 2025) | SPP Capital Partners, Market At A Glance, July 2026 |
| Total leverage, below $10m EBITDA | 2.50x to 3.25x | 2.50x to 4.00x (July 2025) | SPP Capital Partners, Market At A Glance, July 2026 |
| Senior leverage, above $25m EBITDA | 4.25x to 5.25x | SPP Capital Partners, Market At A Glance, July 2026 | |
| Total leverage, above $25m EBITDA | 5.00x to 6.50x | SPP Capital Partners, Market At A Glance, July 2026 | |
| Unitranche leverage band, below $15m EBITDA | 4.00x to 5.50x | Lincoln International, Private Credit Snapshot, as of 1 May 2026 | |
| Minimum base equity capitalization, at least 60% in new cash | 40% | SPP Capital Partners, Market At A Glance, July 2026 |
How healthy are middle-market borrowers?
The median rated direct-lending borrower covers its interest 1.6 times and carries gross leverage of 6.1x, both described by the publisher as holding steady quarter over quarter (KBRA, Middle Market Borrower Surveillance Compendium, Q2 2026, published 28 July 2026). Coverage near 1.6x leaves limited room for a downside year, which is why coverage rather than leverage is the test lenders apply first.
| Metric | Latest quarter | Prior quarter | Source |
|---|---|---|---|
| Median interest coverage ratio | 1.6x | KBRA, Middle Market Borrower Surveillance Compendium, Q2 2026, published 28 July 2026 | |
| Median gross leverage | 6.1x | KBRA, Middle Market Borrower Surveillance Compendium, Q2 2026, published 28 July 2026 |
What are private credit default rates?
Two series answer the question differently by design. The Proskauer Private Credit Default Index, which tracks senior-secured and unitranche loans on a payment and covenant basis, reads 2.51% for Q2 2026 (published 28 July 2026). KBRA's KMDM rate across its rated direct-lending universe reads 3.3% by count for the same quarter (published 28 July 2026). The gap between published default rates is mostly definition, chiefly whether maturity extensions count, and the series should never be averaged.
| Metric | Latest quarter | Prior quarter | Source |
|---|---|---|---|
| Proskauer Private Credit Default Index, headline rate | 2.51% | Proskauer, Private Credit Default Index, Q2 2026, published 28 July 2026 | |
| KBRA KMDM default rate, by count | 3.3% | KBRA, Middle Market Borrower Surveillance Compendium, Q2 2026, published 28 July 2026 |
Workouts and rescue financingWhy published default rates disagree
What is private credit yielding?
Private performing credit yielded 9.97% in Q2 2026, up from 9.70% the prior quarter, at a spread of 576 basis points (Houlihan Lokey, Private Performing Credit Index, Q2 2026). Yield moving up while measured defaults stay near 2.5% to 3.3% is the market pricing tightness of capital, not deterioration of credit, and it is the backdrop against which every row above is negotiated.
| Metric | Latest quarter | Prior quarter | Source |
|---|---|---|---|
| Houlihan Lokey Private Performing Credit Index, yield | 9.97% | 9.70% | Houlihan Lokey, Private Performing Credit Index, Q2 2026 |
| Private Performing Credit Index, spread | 576 bps | Houlihan Lokey, Private Performing Credit Index, Q2 2026 |
Methodology and sources
Every figure on this page is third-party published data, reproduced verbatim with attribution on its own row. Kadenwood publishes no transaction data of its own, and nothing on this page is drawn from the firm's engagements.
The sources: SPP Capital Partners, Market Update (Market At A Glance), published monthly at sppcapital.com; Lincoln International, Private Market Index, Senior Debt Index and Private Credit Snapshot, at lincolninternational.com; Houlihan Lokey, Private Performing Credit Index, at hl.com; KBRA, Middle Market Borrower Surveillance Compendium, published as quarterly releases at kbra.com; and Proskauer, Private Credit Default Index, published as quarterly releases at proskauer.com. Publication dates are stated on each row.
Where a source did not publish a figure in the period covered, the row says so rather than repeating an older value. Figures are quoted in the source's own units, and series that measure different universes are presented separately rather than combined.
This page is general market commentary, not advice or a recommendation. How securities activities are conducted is described in our Disclosures.