Oil, Private Credit Stress, and a Renewed Opportunity for Secured Finance

For much of the past decade, private credit dominated the growth narrative. Nonbank lenders raised trillions of dollars, expanding aggressively into middle‑market lending and, increasingly, asset‑backed transactions. But recent developments suggest the model is now facing its first real stress test at scale.

At the same time, geopolitical tensions—particularly in the Middle East—are once again injecting volatility into energy markets. Rising oil prices are pushing up transportation, manufacturing, and logistics costs, reviving inflationary pressures just as many companies are still adjusting to tighter financial conditions.

For asset‑based lenders, factors, and supply chain finance providers, this environment may mark the early stages of a new cycle—one in which discipline, monitoring, and structural protections grow in prominence.

Private Credit Faces Scrutiny

The growth of private credit has been one of the most significant financial developments since the global financial crisis. As regulatory constraints limited banks’ ability to hold risk, institutional capital flowed into direct lending funds seeking yield.

By 2025, private credit had grown into a roughly $2‑trillion global market, financing leveraged buyouts, recapitalizations, and corporate expansion across the middle market. The speed and scale of that expansion, however, are now prompting closer scrutiny.

Recent headlines around redemption limits at large private credit funds have highlighted a structural tension: many vehicles offer periodic liquidity to investors while holding assets that are inherently illiquid. When withdrawal requests rise, fund managers are forced to gate redemptions, borrow against portfolios, or sell assets—none of which is frictionless.

These developments do not necessarily signal systemic risk, but they underscore an important reality: private credit has not yet been tested through a full downturn at its current size. As volatility increases, both borrowers and investors are reassessing where private credit fits within the broader capital stack.

Energy Volatility Returns to the Foreground

While private credit digests these challenges, geopolitical risks are reasserting themselves through energy markets. The military action in Iran and heightened tensions in the Persian Gulf have driven oil prices higher—historically one of the fastest transmission mechanisms for geopolitical shocks.

Rising energy prices affect nearly every sector of the economy, increasing costs for transportation, production, and inventory. For lenders, the impact is less about immediate credit deterioration and more about how quickly collateral values and working capital needs can shift.

“As transportation and energy costs become more volatile, we’re focused on tighter collateral monitoring rather than blunt restrictions,” said Todd Eubanks, chief risk officer of Siena Lending Group. “That includes refining inventory eligibility around aging and turnover, and increasing appraisal frequency where input costs or logistics risks are elevated. The objective is to keep availability aligned with real liquidation value as conditions shift.”

Higher costs often translate into higher working capital requirements. Companies need additional liquidity to manage inventory, absorb cost increases, and maintain supply‑chain resilience—dynamics that tend to favor secured lending structures.

Why ABL Performs in Volatile Markets

Periods of economic uncertainty have historically favored asset‑based lending. Unlike cash‑flow lending, which relies heavily on earnings projections and leverage assumptions, ABL is anchored in collateral performance.

Borrowing availability adjusts as receivables, inventory, and equipment values change, providing built‑in responsiveness to shifting conditions. That flexibility makes ABL both protective for lenders and practical for borrowers navigating uneven cash flows.

Increasingly, borrowers view ABL as a strategic liquidity tool—particularly when volatility makes forecasting less reliable.

Working Capital Finance Comes Back into Focus

Energy price shocks rarely affect a single industry in isolation. Higher transportation costs ripple through supply chains, influencing sourcing strategies, inventory levels, and payment behavior. As a result, companies are revisiting a range of working capital solutions, including asset‑based revolvers, receivables financing, inventory facilities, and supplier finance programs.

One solution that is increasingly available to middle‑market businesses is supply chain finance. Historically, these programs were largely limited to Fortune 500 companies, but providers have expanded the offering into the middle market.

“Supply chain finance provides financing and risk management benefits to both the buyer and supplier of goods and services,” said Tom Kessel. “For the buyer, it creates a more strategic relationship with key suppliers and lengthens accounts payable payment terms. For the supplier, it strengthens the relationship with key customers and—through early payment provisions—reduces the days outstanding on its receivables at an efficient cost.”

The strongest demand for working capital solutions is emerging in sectors where the gap between earning revenue and collecting cash is widening.

“We’re seeing the strongest demand in sectors where there’s a natural mismatch between when revenue is earned and when cash is collected—particularly staffing, transportation, and industrial services,” said Joe Heim, chief credit officer of Culain Capital Management. “For example, we provided a $1.5 million facility to a staffing company that needed to bridge weekly payroll against 60‑ to 75‑day receivables. That wasn’t distress—it was growth combined with slower payment cycles.”

In transportation, delayed payments are becoming routine. “We’re consistently seeing carriers dealing with extended broker payment terms,” Heim added. “Access to same‑day liquidity has become critical to maintaining operations.”

Across sectors, the common theme is timing. “Companies are still generating revenue,” he said, “but cash‑conversion cycles are extending, creating immediate working capital pressure.”

Borrowers Look Beyond Traditional Credit Expansion

Borrowers are also working to expand the level of available credit using a broader set of tools.

“Companies are looking at several avenues to increase liquidity,” said Tom Kessel, principal, Glengarry Capital Group. “That includes expanding eligibility definitions with existing lenders, seeking out new lending relationships with expanded eligibility definitions, and refinancing through leveraged equipment and real estate.”

He added that companies are increasingly opting to enter into sale‑leaseback transactions on owned real estate. “Those transactions can free up capital to support growth initiatives and general business operations,” Kessel said, without disrupting core lending relationships.

Factoring Gains Momentum as Payment Behavior Shifts

Factoring is often one of the earliest beneficiaries of changing payment dynamics. When customers begin stretching terms or banks tighten credit, receivables quickly become a source of liquidity.

From a risk perspective, the earliest warning signs are increasingly behavioral. “We’re less focused on static credit metrics and more on behavioral signals,” Heim said. “The first thing we watch is payment slippage—when 30‑day terms quietly become 45 or 60.”

Disputes and short pays are another concern. “Those often signal operational or liquidity friction at the account‑debtor level and tend to precede broader disruptions,” Heim noted. In one recent example, a workforce solutions provider experienced elongating payment cycles from large, creditworthy customers. “The underlying credit was sound,” Heim said. “But timing shifted—and that’s increasingly what risk looks like in this market.”

Differentiation Within Private Credit

Despite near‑term pressures, private credit remains a significant force. Institutional investors continue allocating capital, but risk is gradually being repriced after years of compressed spreads and borrower‑friendly terms. Kessel emphasized that the private credit market itself is increasingly bifurcated.

“The private credit world consists of two distinct worlds,” he said. “On the one hand, there are large private credit funds making sizable commitments to cash‑flow‑structured transactions with minimal collateral backing—some of which have been highlighted in the news for redemption challenges. On the other hand, there’s a very different segment focused on traditional secured financing solutions such as asset‑based lending, factoring, and supply chain finance.”

“These providers, their funding, and their solutions are much more stable,” Kessel added, “given the direct connection between their credit structure and the underlying collateral.”

As some borrowers and investors grow more cautious, secured finance providers have an opportunity to differentiate. “The differentiator right now isn’t just capital, it’s certainty of execution,” Heim said. “The ability to underwrite quickly, fund consistently, and adapt to changing conditions matters.”

The Bottom Line

The convergence of energy volatility and private credit stress is reshaping the lending landscape. While uncertainty poses challenges, it is also reaffirming the role of collateral‑based finance.

For asset‑based lenders, factors, and supply chain finance providers, the coming years may present one of the most meaningful opportunities since the global financial crisis.