Why private debt remains resilient in economic downturns

Investing in stability, even when markets shift.

Economic cycles bring periods of growth and downturn, each presenting challenges and opportunities for investors. As global markets grapple with volatility, one asset class that has consistently proven its resilience is private debt.

Let’s explore why private debt stands firm during economic downturns and how it can complement a diversified investment portfolio.

Private debt provides stability in the face of volatility

Private debt’s resilience lies in its structured and secured nature. Loans are typically backed by tangible assets, and lending terms are tailored to mitigate risk. This structure helps ensure investors continue to receive consistent income, even when markets are turbulent.

Capspace specialises in short-term lending solutions to Australian small, medium, and emerging businesses (SMEs) seeking capital for expansion, acquisitions, or working capital. Our lending products are secured by real property and business assets, as well as directors’ personal guarantees, and are carefully structured to manage risk.

Current economic challenges, including rising interest rates and an ongoing housing shortage, have only underscored this stability. This Money Magazine article highlights that private lenders have played a pivotal role in providing flexible financing solutions as traditional funding avenues tightened. Read the full article here.

Tailored solutions make private debt flexible

Private debt’s strength also lies in its flexibility. Unlike rigid bank lending models, private lenders work closely with brokers and borrowers to design bespoke solutions that reflect the realities of their businesses and industries. This agility allows private debt to respond swiftly to changing conditions, whether it’s higher interest rates, tighter liquidity, or sector-specific shocks.

An article by MPA Magazine highlighted how private credit plays a crucial role during credit crunches, stepping in to fill the gaps left by traditional banks. Explore more insights here.

Private debt thrives when credit tightens

During economic downturns, traditional banks often adopt a more conservative approach, slowing down processes and increasing red tape. Private lenders are well-positioned to step in, supporting quality borrowers who require fast and flexible finance to seize growth opportunities. For investors, this often means access to attractive yields, supported by strong security and risk discipline.

As seen over the past year in Australia, private lenders like Capspace have helped maintain liquidity in key sectors such as SMEs and property. In doing so, they’ve played a vital role in keeping capital flowing where it’s needed most.

Adviser Voice noted that private lenders, including Capspace, have been instrumental in sustaining market liquidity, particularly during Australia’s housing shortage. Read more here.

Private debt supports real-world economic needs

A defining feature of private debt is its direct contribution to the real economy. Capital from the Capspace Private Debt Fund is used to provide short-term loans to growing Australian SMEs, which in turn drive job creation and broader economic activity. These are tangible outcomes not subject to market sentiment.

This alignment with economic fundamentals enhances private debt’s resilience, especially when public market confidence wavers.

As Property Buzz reported, private lenders are often the backbone of key economic initiatives during periods when other funding sources retreat. Discover the full story here.

Private debt as a defensive investment choice

For investors seeking steady income and reduced volatility, private debt makes a compelling case. Its defensive characteristics, such as fixed income, asset-backed security, and low correlation to public markets, make it a strong addition to a diversified portfolio.

An Architecture & Design article explored the role of private credit in stabilising key sectors during supply shortages, highlighting its ability to provide much-needed funding and support. Read about this perspective here.

Conclusion

Private debt stands out for its structure, flexibility, and connection to the real economy. It offers investors not only stable income, but also a way to invest with purpose and resilience.

As Capspace continues to support Australia’s growing SMEs and our investor community, our focus remains on delivering value through disciplined, secure, and impact-driven lending – while providing security. In uncertain times, private debt is a reminder that stability and opportunity can go hand in hand.

 

Why investors choose Capspace.

At Capspace, we’ve built a reputation as a leader in the private debt space, specialising in short-term lending solutions for growing Australian SMEs. Our focus is on supporting these businesses with the capital they need to thrive, while delivering strong, risk-adjusted returns for our investors.

Here’s what sets us apart.

  • Experienced leadership and expertise. Our team is led by four senior industry professionals with over 100 years of combined experience across global finance, law, and property, and a proven track record in private debt.
  • Consistent and reliable returns. Since inception, we’ve delivered stable returns through a disciplined approach to risk management.
  • Security. Loans are secured by real property, business assets, and directors’ personal guarantees.
  • Transparency. We provide clear visibility into where your money is invested, with regular reporting and independent third-party audits of secured assets.
  • Regular income. Our private debt fund offers consistent monthly interest payments, providing predictable cash flow.
  • Enhanced liquidity. Our fund is diversified across multiple projects and industries, offering flexibility and access to funds when needed.
  • Personalised service. No matter the level of investment, we take the time to understand your goals. Our approach is grounded in clear communication and long-term relationships tailored to your individual needs.
  • Alignment with investor values. We prioritise responsible lending and align our strategy with the principles of our clients.
  • Innovation and agility. We adapt to market conditions, identifying high-quality opportunities that deliver value.

*Past performance is not indicative of future results. Investors should consider their own objectives and risk tolerance before investing.

 

To learn more about Capspace’s approach to private debt, get in touch with our investment team.

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Disclaimer: This document has been prepared by Capspace Funds Management Pty Ltd (ACN 673 343 023) (AFSL 555758) (‘Capspace, ‘we’ or ‘us’), and is for general information purposes only and is not an offer or solicitation for the purchase or sale of any financial product or service. The document has been prepared for investors who qualify as wholesale clients under sections 761G of the Corporations Act 2001 (Cth) or to any other person who is not required to be given a regulated disclosure document under the Corporations Act. The material is not intended to provide you with financial or tax advice and does not take into account your objectives, financial situation or needs.

Although we believe the material is correct, no warranty of accuracy, reliability or completeness is given, except for liability under statute which cannot be excluded.

Investments involve risk. Prior to considering an investment you must obtain the Fund Information Memorandum which will outline the risks involved and other relevant information. Please note that past performance may not be indicative of future performance and that no guarantee of performance, the return of capital or a particular rate of return is given.

This material is proprietary to Capspace. The recipient of this material agrees not to reproduce or distribute this material in whole or in part and not to disclose any of its contents to any other person.