What does a performing private loan cost right now?
About 576 basis points over the base rate, on the broadest published measure of loans that are actually performing. That is the weighted average spread in Houlihan Lokey's Private Performing Credit Index at 30 June 2026, down 8 basis points from 584 at 31 March, and lower than any quarterly reading on the chart since the index began at 30 September 2017 (Houlihan Lokey, Private Performing Credit Index, Q2 2026, released August 2026).
The comparison that matters is with three years ago. At 30 June 2023 the same series stood at 722 basis points. It has fallen in every quarter since, twelve consecutive declines, for a cumulative compression of 146 basis points. The previous low in the series, before this cycle, was 607 basis points at 30 September 2019, so the current reading is not a return to pre-pandemic pricing. It is below it.
The index is built from Houlihan Lokey's own valuation work: more than 30,000 qualifying quarterly asset valuations performed since September 2017, with yields computed as the implied internal rate of return on the firm's fair value estimate of each loan and weighted by principal balance. It covers performing loans only, so it measures what a lender is being paid to hold a credit that is paying, not what a workout is worth.
For a borrower the number is useful precisely because it is not a survey and not a marketing figure. It is the spread embedded in loans that already exist, marked by a third party, and it says the market clearing price for a performing middle-market credit has been falling for three years without interruption.
Then why did the yield go up?
Because the loans in the index changed, not because the loans got dearer. The weighted average yield rose 27 basis points in the quarter, from 9.70 percent to 9.97 percent, and Houlihan Lokey attributes 33 basis points of movement to composition, meaning which loans entered and left the sample. Against that, the weighted average coupon fell 5 basis points and the spread fell 8.
So every component a lender actually negotiates with a borrower moved down. The headline moved up because the mix of loans being valued shifted toward higher-yielding paper. Houlihan Lokey says as much in the release, noting that the change in composition may affect the index in a way that is not consistent with general experience, and that the component changes are not meant to bridge cumulatively from one quarter's yield to the next.
That distinction is easy to lose in a headline. A founder who reads that private credit yields rose in the second quarter and concludes that lenders have started charging more has read the wrong line. The line for a borrower is the spread and the coupon, and both went the other way.
Price confirms it. The weighted average mark on loans in the index rose from 98.65 percent of par at 31 March to 98.79 percent at 30 June. Loans marked closer to par are loans the valuer thinks are worth closer to what was lent, which is not the profile of a market repricing risk upward.
| Quarter end | Yield | Spread (bps) | Price (% of par) |
|---|---|---|---|
| 30 June 2023 | 12.0% | 722 | 97.7 |
| 30 September 2023 | 12.3% | 719 | 98.0 |
| 31 December 2024 | 10.7% | 638 | 99.0 |
| 31 March 2025 | 10.4% | 626 | 98.9 |
| 30 June 2025 | 10.0% | 615 | 98.9 |
| 30 September 2025 | 9.7% | 602 | 99.0 |
| 31 December 2025 | 9.6% | 587 | 99.1 |
| 31 March 2026 | 9.70% | 584 | 98.65 |
| 30 June 2026 | 9.97% | 576 | 98.79 |
“Borrowers negotiate spread, coupon and fees. They do not negotiate the composition of a valuation index. When the index yield rises and all three of the things you negotiate fall, the market has moved in your favour, whatever the headline says.”
How does a record-tight spread square with tighter terms?
Both are true at once, and they describe the same market from two sides. Houlihan Lokey's own lender survey for the same quarter had 98 percent of private credit lenders reporting notably stricter underwriting since the start of 2026 (Houlihan Lokey, Q2 2026 Private Credit Survey). The performing index, from the same firm, has the price of a performing loan at a series low.
The reconciliation is that lenders are competing on price for the credits they want and declining the ones they do not. A performing borrower with a clean profile is being offered a tighter spread than at any point in the series. A borrower with a story to tell is being asked for more covenant, more equity and less payment-in-kind flexibility, and may not be offered a loan at all. Dispersion, not a uniform tightening or a uniform loosening, is what the two data sets together describe.
That has a practical consequence for how to run a financing. The spread a lender quotes on the first call is a spread for the version of the business it assumes it is looking at. Whether the business ends up priced off the performing index or off the survey depends on what the diligence finds, and the gap between those two outcomes is now wide.
It also means the tightening cycle in terms and the loosening cycle in price can continue together for some time. Neither data set suggests the other is about to reverse.
What is the premium over public credit worth?
Roughly two and a half percentage points of yield at the end of June, on the index's own comparison. Houlihan Lokey plots the performing private index against the ICE BofA US High Yield Master II, and the chart labels put the public benchmark at about 7.5 percent at 30 June 2026 against 9.97 percent for the private index. At 31 March the gap was closer to two points, with high yield at about 7.7 percent against 9.70 percent.
The private premium therefore widened in the quarter, but again for the composition reason rather than because private lenders repriced. A borrower comparing a private quote with a public alternative should compare spreads and coupons directly rather than reading the gap between two indices, one of which just changed its constituents.
For a company at the size where a bond is not available, which is most of the companies reading this, the comparison is between a private lender's spread and a bank's. On the evidence of the index the private spread has moved a long way toward the bank in three years, and the difference between them is now more about structure, hold size and speed than about the headline margin.
None of this makes a private loan cheap in absolute terms. A yield just under 10 percent on senior secured paper is a real cost of capital, and it is a cost that has been between roughly 9.6 and 10 percent for five consecutive quarters. What has changed is that the part of it a borrower can negotiate has never been smaller.
What should a borrower do with a spread that has fallen twelve quarters running?
Reprice, or at least test whether you can. A loan written in 2023 at the top of the series carries a spread roughly 146 basis points wider than the market now clears for a performing credit. Amend and extend, a straight refinancing, or a competitive process with a second lender are all ways to close some of that gap, and a lender that knows the index will expect the conversation.
Bring the profile that prices off the index rather than off the survey. That means clean numbers, covenant headroom, and no request for the flexibility that 55 percent of surveyed lenders now decline on a new deal (Houlihan Lokey, Q2 2026 Private Credit Survey). The tight end of the market is real, but it is available only to the borrower a lender can underwrite quickly.
Do not mistake the headline yield for your price. When the next quarterly release moves, look at spread, coupon and price before the yield, and look at the composition note before drawing a conclusion from any of them. Houlihan Lokey publishes that bridge with each release for exactly this reason.
And keep the trend in perspective. Twelve quarters of compression from a 722 basis point peak have taken the series to a level it has never printed before. That is not a forecast that it continues, and a spread that has never been lower has more room to widen than to tighten. A borrower with a facility maturing in the next two years is better placed fixing terms while the series is at its low than waiting to see whether it goes lower still.
As of August 2026
Sources: Houlihan Lokey, Private Performing Credit Index, Q2 2026 release, published August 2026 and read from the six-page PDF at cdn.hl.com, for the weighted average price of 98.79 percent of par, weighted average yield of 9.97 percent and weighted average spread of 5.76 percent at 30 June 2026; for the yield rising 27 basis points from 9.70 percent at 31 March 2026; for the weighted average spread decreasing from 584 basis points at 31 March 2026 to 576 at 30 June 2026, a decrease of 8 basis points; for the weighted average coupon decreasing 5 basis points over the same period; for the change in index components contributing an increase of 33 basis points to the index internal rate of return over the same period; for the weighted average price rising from 98.65 percent of par at 31 March 2026 to 98.79 percent at 30 June 2026; for the index being computed from more than 30,000 qualifying quarterly asset valuations performed since 30 September 2017 as weighted average implied internal rates of return on the firm's fair value estimates, weighted by aggregate principal balance; for the statement that the change in composition may affect the index in a way not consistent with general experience and that the component changes are not meant to bridge cumulatively; and, from the data labels on the release's own charts, for the historical yield, spread and price series in the table, for the 722 basis point spread at 30 June 2023 and the 607 basis point reading at 30 September 2019, for twelve consecutive quarterly spread declines from 30 June 2023 to 30 June 2026, and for the ICE BofA US High Yield Master II labels of about 7.7 percent at 31 March 2026 and about 7.5 percent at 30 June 2026 in the release's private-against-public comparison chart. Houlihan Lokey, Q2 2026 Private Credit Survey, for 98 percent of surveyed private credit lenders reporting notably stricter underwriting since the start of 2026 and for 55 percent declining payment-in-kind flexibility on a new transaction. The 146 basis point compression, the twelve-quarter count, the two and a half point private-over-public gap and the description of 576 basis points as the lowest reading since inception are arithmetic on and readings of the published series, not statements made in the release. Companion articles on this site cover base rates and debt service, amend and extend, and what a lender's own funding costs.