20 Credit Analyst Interview Questions and How to Answer Them

A credit interview can jump from the five Cs of credit to a covenant calculation to where a loan sits when a company fails, and every one of those questions is testing the same thing. Credit analyst interviews come back to one judgment: whether a borrower will pay a loan back, and what the lender recovers if it doesn't. How hard the questions push on that judgment depends on the seat, from fit-heavy commercial bank interviews to private credit funds that add a full case study.

The 20 questions below come at that judgment from different angles: cash flow, leverage and coverage ratios, covenants, ratings, loan pricing, and recovery. The first six are the core of credit analysis at any seat, the next twelve are grouped by seat (commercial bank, rating agency, leveraged finance, and private credit), and the last two are the fit and market questions. Each comes with the answer an interviewer expects and, where there's math, the arithmetic behind it.

How Technical the Interview Gets at Each Seat

How technical a credit interview gets depends on the seat: commercial banks ask mostly fit and basic credit questions, rating agencies and leveraged finance groups ask more technical ones, and private credit funds add a case study. Mergers & Inquisitions says commercial bank credit interviews "are rarely technical," so expect fit questions plus basic accounting (WSG's 50 accounting interview questions cover that part) and questions 1 to 9. Rating agency interviews are more technical, and M&I says candidates there are "more likely to get questions about evaluating specific companies and issuances," which questions 10 to 12 cover. For leveraged finance, M&I's LevFin guide says recruiting works like other banking groups, except that "you're likely to receive a higher percentage of technical questions." Expect bond analysis, simple LBO mechanics, and the current debt market, which questions 13 to 15 and 20 cover.

Private credit funds go furthest. M&I's private credit interview guide describes simple 1-hour cases where you read the filings or an information memo and make a quick decision, and 3- or 4-hour cases with a model and a presentation. It says most of them "are like 3-statement models or LBO models, but with simpler mechanics," so questions 3 and 18 are the closest practice for that seat.

Core Credit Questions

1. How Would You Decide Whether to Lend $10 Million to a Company?

Walk through the five Cs of credit (character, capacity, capital, collateral, and conditions), put numbers under capacity, and finish with a yes or no and the terms you'd want. The five Cs, as the Secured Finance Network lists them, give your answer an order the interviewer can follow.

Character: the borrower's reputation and integrity, which a lender reads from payment history and how management has treated lenders before.

Capacity: whether the cash flow covers the loan. Say the company earns $4 million of EBITDA, and the $10 million loan costs 8 percent with 10 percent of the principal due each year. That's $0.8 million of interest plus $1 million of principal, or $1.8 million a year against $4 million of earnings before capex and taxes, about 2.2 times coverage. If capex and taxes take another $1.5 million, $2.5 million is left, about 1.4 times what's due and above the 1.25x most banks want (question 7). Leverage is 2.5x, $10 million over $4 million.

Capital: how much of the owners' money is in the business. $10 million of debt on $15 million of equity is a safer loan than $10 million on $2 million, because the equity absorbs losses before the lender does.

Collateral: the assets pledged to the lender, which give it a second source of repayment if the cash flow fails.

Conditions: the loan's own terms, such as what the money is for, how it's repaid, and the interest rate. Corporate Finance Institute also counts outside forces, such as the economy, under conditions.

Capacity carries the most weight, because a loan is meant to be repaid from cash flow, with collateral as the backup. Then answer the question you were asked: "Yes, with a maximum leverage covenant" is a stronger ending than a summary of the five Cs. The same structure answers "pitch me a credit": pick a company whose filings you've read and run it through the five Cs with its real numbers.

2. Which Metrics Tell You a Company Can Carry Its Debt?

Lenders lean on four ratios (leverage, interest coverage, debt service coverage, and fixed charge coverage), and each answers a different question about the same borrower.

Leverage (total debt divided by EBITDA): how many years of earnings the debt represents. At 5.0x, it's five years.

Interest coverage (EBITDA divided by interest expense): how many times over the company earns its interest bill. At 2.0x, it earns the interest twice before capex and taxes.

DSCR, the debt service coverage ratio: the cash available for debt payments divided by interest plus scheduled principal. It's the bank's main test, covered in question 7.

FCCR, the fixed charge coverage ratio: a variant of DSCR that tests the borrower against more of what it has to pay. Some versions start from EBITDA less capex and cash taxes, as question 18 does, and some add fixed costs such as rent to the payments it must cover. M&I notes these ratios "may be defined in slightly different ways," so say which version you're using; in practice, the definition in the loan agreement is the one that gets tested.

Liquidity sits next to the four: cash plus the undrawn revolver (the credit line a company can draw and repay as it needs) against the next 12 months of payments. A company can pass every ratio and still default if it runs out of cash before the next quarter.

3. How Do You Get From EBITDA to the Cash That Repays a Loan?

Start with EBITDA and subtract cash interest, cash taxes, capital spending, and the cash tied up in working capital, because EBITDA comes before all four and a lender is repaid from what's left. Interest comes off first because the lender's interest is paid before anything goes to principal. Taxes are the amount actually paid in cash. Capex comes off because a company that stops replacing its trucks stops earning. And if receivables and inventory grew faster than payables, cash went into the business and can't repay the loan.

That's also why lenders don't size a loan on EBITDA alone. Take two companies with the same $100 million of EBITDA, one in software and one in trucking, holding interest, taxes, and working capital equal to keep it simple:

$ millions	Software company	Trucking company
EBITDA	100	100
Less: cash interest	(30)	(30)
Less: cash taxes	(12)	(12)
Less: capital expenditures	(5)	(40)
Less: increase in net working capital	(8)	(8)
Free cash flow for debt repayment	45	10

The two look identical on EBITDA, but the software company has four and a half times the cash for principal, because trucks wear out and have to be replaced. Against $500 million of loans, the software company could repay 9 percent of the balance a year and the trucking company 2 percent.

The other problem is "adjusted EBITDA." A buyout marketing deck adds back restructuring costs, expected cost savings, and one-time items, and the definition in the credit agreement decides which of those count toward the covenants. WSG's EBITDA post walks through the calculation itself.

4. What's the Difference Between a Maintenance Covenant and an Incurrence Covenant?

A maintenance covenant is tested every quarter whether or not the borrower does anything, while an incurrence covenant is tested only when the borrower takes an action, such as borrowing more or making an acquisition. PitchBook LCD's leveraged loan primer, the source of those definitions, calls maintenance covenants "far more restrictive."

The difference shows up when earnings fall. With a 6.0x maximum leverage maintenance covenant, a borrower at 6.1x in any quarter is in breach, and the lenders can charge a fee, raise the rate, or demand repayment. With a 6.0x incurrence test, the same borrower at 6.5x isn't in breach. It just can't borrow more or make the acquisition until it's back under the line.

Where each one shows up depends on the market:

• Syndicated loans: covenant-lite loans, which carry only incurrence covenants, make up over 90 percent of the syndicated loan market, per LCD’s primer (updated March 2026). A syndicated term loan B (the institutional term loan in a leveraged deal, covered in question 14) typically keeps only a springing maintenance test for the revolver lenders, per Ashurst's loan and bond comparison. Springing means the test switches on only when the revolver is drawn past a set amount.

• Private loans: the smaller the borrower, the more likely the quarterly test. Of loans originated in 2024, 97 percent in the lower middle market and 77 percent in the core middle market had a maintenance covenant, against 38 percent of large-cap private loans and 10 percent of syndicated loans, per KBRA DLD data compiled by Future Standard.

5. How Much Covenant Cushion Does This Borrower Have?

The interviewer gives you the setup: "A borrower has $100 of EBITDA and $500 of debt at 6 percent, with a 6.0x maximum leverage covenant and a 2.0x minimum interest coverage covenant."

The cushion is how far EBITDA can fall before a covenant breaks, and here the leverage test breaks first, after a 16.7 percent drop.

The leverage test binds first: EBITDA can fall $16.7, or 16.7 percent, before it breaks, against $40.0 before the coverage test does.

For leverage, divide the debt by the covenant multiple: $500 divided by 6.0 is $83.3, the lowest EBITDA that still passes. For coverage, interest is 6 percent of $500, or $30, so the lowest passing EBITDA is 2.0 times $30, or $60. Working backward from the covenant to the EBITDA that breaks it is the step to say out loud, because it's the same method for any test the interviewer adds.

Finish by naming the test that binds and judging the cushion. If EBITDA falls 17 percent, the borrower trips the leverage test while still covering its interest about 2.8 times. Proskauer wrote in 2023 that in European private credit, covenant headroom (how far EBITDA can fall short of the base case before a breach) was historically often 25 percent and is now 30 percent or more in almost all deals. By that standard, 16.7 percent is tight.

6. Who Gets Paid First If a Company Goes Bankrupt?

Secured lenders at the top of the capital structure get paid first, and on Moody's long-run data, first-lien bank loans have recovered about 65 cents on the dollar against 38 cents for senior unsecured bonds. These are Moody’s recoveries from 1983 to 2023, measured by trading prices after default and cited in a Bermuda Monetary Authority paper. The chart shows the order from the top.

Under the absolute priority rule, each claim is paid only after every claim above it is paid in full.

A DIP loan, which is new money lent to a company during bankruptcy, is usually paid first, and when the court lets it prime the existing liens, it ranks ahead of even the first-lien lenders. Second-lien loans share the first-lien lenders' collateral with a junior claim, and shareholders, as Corporate Finance Institute puts it, "divide what remains after all creditors are paid."

A secured lender is secured only up to the value of its collateral: if the collateral is worth less than the loan, the shortfall becomes an unsecured deficiency claim.

Commercial Bank Credit

7. What Is DSCR, and What Minimum Do Banks Want?

DSCR divides the cash a borrower has for debt payments by the interest and principal due, and commercial banks usually want at least 1.25x. Corporate Finance Institute's DSCR page says most commercial banks and equipment finance firms "want to see a minimum of 1.25x but strongly prefer something closer to 2x or more." At exactly 1.25x, debt payments take 80 percent of the available cash, which leaves 20 percent for a bad quarter.

Say a company has $2.5 million of cash available for debt service, and its loan costs $1.6 million of interest plus $0.4 million of principal a year, $2.0 million in total. DSCR is $2.5 million divided by $2.0 million, or 1.25x, right at the floor. If cash falls 10 percent to $2.25 million, DSCR drops to 1.13x and a 1.25x covenant is broken.

The usual follow-up is what goes in the numerator, and as in question 2, it depends on the lender. CFI's version uses EBITDA less cash taxes. M&I's direct lending guide uses free cash flow plus interest expense, over interest plus mandatory principal repayments. Give one, and say the credit agreement decides.

8. What's a Borrowing Base, and How Do Advance Rates Work?

A borrowing base caps a revolver at a percentage of the collateral the lender will count, and the Secured Finance Network (SFNet) puts the usual advance rate on receivables at 80 to 85 percent, with inventory usually lower and more variable. An asset-based loan lends against receivables and inventory instead of cash flow. The lender first removes what it won't count, such as old, unpaid invoices and stale inventory, then applies an advance rate to the rest. SFNet's glossary says inventory advance rates run "from 25%-90%, depending on the type of inventory," set against net orderly liquidation value, meaning what the inventory would fetch in an orderly sale after costs.

Borrowing base	$ millions
Eligible receivables	10.0
At an 80 percent advance rate	8.0
Inventory at net orderly liquidation value	6.0
At a 50 percent advance rate	3.0
Borrowing base	11.0
Revolver commitment	15.0
Amount drawn	7.0
Availability (lesser of base and commitment, less drawn)	4.0

The base moves with the collateral, and that's the point to make. If receivables fall to $7 million in a slow quarter, the receivables piece drops to $5.6 million, the base to $8.6 million, and availability to $1.6 million. If the base falls below the amount drawn, the borrower has to pay the difference down, because the base is the most it can borrow.

9. What's in a Credit Memo, and What Do the Risk Ratings Mean?

A credit memo makes the case for or against a loan and ends in a risk rating, and below the pass grade, regulators use four grades for weaker loans: special mention, substandard, doubtful, and loss. A guide to credit memos from the bank software firm Abrigo puts the decision at the top and covers these parts:

• The decision being requested

• The borrower's background

• The purpose of the loan and how it will be repaid

• The risks to repayment

• Financial ratios and projections

• Covenants, pricing, and terms

• Collateral

• The risk rating and recommendation, which Abrigo calls "critical components of the credit memo"

Loans in good standing are pass credits. The grades below them come from the federal bank regulators, and the OCC's Rating Credit Risk booklet defines them roughly like this:

Special mention: the loan has potential weaknesses that need management's close attention.

Substandard: the borrower's finances or the collateral no longer protect the loan adequately.

Doubtful: everything wrong with a substandard loan, plus full collection looks highly unlikely.

Loss: the loan is considered uncollectible, so the bank shouldn't keep carrying it as an asset.

The move from pass to special mention is the one to explain, because it's the bank's early warning. The weakening behind that move also raises the expected loss, which is probability of default times loss given default times exposure at default. A $10 million loan with a 2 percent probability of default and a 40 percent loss given default carries an expected loss of $80,000. If the borrower weakens enough to be downgraded and its probability of default rises to 10 percent, the expected loss becomes $400,000.

Rating Agencies

10. Can You Walk Me Through the Rating Scale and Where Investment Grade Ends?

Investment grade ends at Baa3 on Moody's scale and BBB- on S&P's, and everything below that line is speculative grade.

One notch below Baa3 or BBB- moves a company from investment grade to speculative grade.

The follow-up is why one notch across that line matters, and the answer is who can hold the debt. When a company falls below it, the European Central Bank notes, "such a downgrade can force (institutional) investors to sell securities," because their mandates limit what they can hold, and it "may also trigger a sharp increase in a firm's cost of bond financing." Bonds that fall across the line are called fallen angels.

11. What's the Difference Between an Outlook and a Watch?

An outlook says where a rating is likely to go over the medium term, while a watch says a change is likely soon: S&P puts a rating on CreditWatch when there's at least a one-in-two chance it changes within 90 days. S&P's ratings definitions put the outlook horizon at "generally up to two years for investment grade and generally up to one year for speculative grade." Moody's has its own versions of both and calls its watch a review.

Outlooks come in four labels: positive, negative, stable, and developing.

When S&P cut Adecco from BBB+ to BBB on November 17, 2025, it moved the outlook from negative to stable, per Staffing Industry Analysts, a signal that it expected the new rating to hold. The Paramount case shows a watch tied to a pending deal: after Paramount Skydance agreed to merge with Warner Bros. Discovery, S&P kept Paramount on CreditWatch negative in March 2026 and said it expected to "equalize our ratings on WBD with those on PSKY after the transaction closes," as TheWrap reported.

12. What Makes a Rating Agency Downgrade a Company?

A rating measures the chance that lenders are paid in full, so agencies downgrade when leverage rises past their threshold or the business shrinks, and they can cut the rating on existing debt when new debt ranks ahead of it.

Warner Bros. Discovery (WBD) was downgraded for all three reasons in 2025:

• Leverage: S&P cut it from BBB- to BB+ on May 20, 2025, citing "continued revenue and cash flow declines at its linear TV operations" and leverage it expected to reach 4.3x, against its 3.5x threshold, as Variety reported.

• A smaller business: in June, after WBD announced plans to split in two, Fitch cut it from BBB- to BB+, saying the company after the split would be "smaller and less diversified in a secularly declining industry."

• Debt ahead of the old lenders: Moody's cut the senior unsecured notes from Baa3 to Ba1, citing "persistent operating challenges and a change in its financial policies," as TheWrap reported. The change was secured debt: WBD's $17 billion bridge loan was secured on its assets, ahead of the existing unsecured notes.

Leveraged Finance

13. What's the Difference Between a Leveraged Loan and a High-Yield Bond?

A leveraged loan usually floats over SOFR (the Secured Overnight Financing Rate, the benchmark most US loans are priced off), is secured, and can be repaid early after a short soft call period, while a high-yield bond usually pays a fixed coupon, is unsecured, and is non-call for its first two to five years.

Neither one usually gives its term lenders or bondholders a quarterly maintenance test; at most, the loan's revolver gets a springing one.

Each row changes the lender's risk, so explain them as you go. A floating rate means the lender earns more when SOFR rises, while the borrower's coverage falls at the same time. A soft call means a loan borrower can refinance at par once the call period ends, often 6 to 12 months after closing per White & Case, so it can cut its rate soon after the market tightens, while a bond's non-call period locks in the investor's coupon for years. And security matters because of the recovery gap in question 6.

14. How Is a Term Loan B Priced, and What Do a Floor and an OID Do to the Yield?

A term loan B pays a spread over SOFR, a floor sets the lowest base rate the lender will accept, and an OID is a discount at issue that adds to the lender's yield over the life of the loan. A loan priced at SOFR plus 250 pays the base rate plus 2.50 percent. The floor protects the lender when rates fall: with a 3 percent SOFR floor, the loan keeps charging 3 percent plus the spread even if SOFR drops below 3, per LCD. The OID pays the lender up front: a loan issued at 99 cents on the dollar and repaid at par carries 1 point, or 100 bps (basis points; 100 bps equals 1 percent), of OID.

Layer	Example	Effect on the yield
Base rate	SOFR at 3.89 percent on October 15, 2026, per the New York Fed	Starting point
Spread	SOFR + 250	Coupon of 6.39 percent
Floor (illustrative; real floors today are usually 1 percent or less)	3.00 percent	If SOFR fell to 2 percent, the coupon would be 5.50 percent instead of 4.50
OID	99, or 1 point	About 25 bps a year, assuming a four-year life
All-in yield	Coupon plus the OID spread over four years	About 6.6 percent

15. A Sponsor Wants 7x Debt to EBITDA Instead of 5x. How Do You Evaluate It?

Run the same three numbers at both leverage levels (interest coverage, free cash flow after interest, and the years it takes to repay half the debt), then test both against a drop in EBITDA. The sponsor is the private equity firm buying the company. For scale, private credit buyouts of companies with $50 million or more of EBITDA averaged 5.5x total debt to EBITDA in December 2025, the core middle market 4.75x, and the lower middle market 4.1x, per KBRA DLD data cited by Kirkland & Ellis.

Run it on $100 million of EBITDA and an 8 percent interest rate, with $10 million of capex and $10 million of cash taxes held the same at both levels to keep the comparison simple:

$ millions	5.0x	7.0x
Debt	500	700
Interest at 8 percent	40	56
Interest coverage (EBITDA divided by interest)	2.5x	1.8x
Free cash flow (EBITDA less interest, capex, and cash taxes)	40	24
Years to repay half the debt from free cash flow	6.3	14.6
Interest coverage if EBITDA falls 30 percent to $70	1.75x	1.25x
Free cash flow if EBITDA falls 30 percent (cash taxes drop to $5)	15	(1)

On these numbers, the answer is no to 7x as proposed. The 5x case repays half its debt in about six years, while the 7x case takes nearly 15 and turns cash negative in the downside. Then say what would change your answer: less debt, which usually means a bigger equity check from the sponsor, or a tighter leverage covenant that brings the sponsor back to the table early if earnings slip.

The half-the-debt test comes from bank regulators' 2013 leveraged lending guidance, which treated the ability "to repay at least 50 percent of total debt over a five-to-seven year period" as evidence of adequate repayment capacity and said leverage "in excess of 6X Total Debt/EBITDA raises concerns for most industries." The 5x case passes that test and the 7x case doesn't. The OCC and FDIC rescinded that guidance on December 5, 2025; the Federal Reserve hadn't as of October 2026.

Private Credit

16. What's the Difference Between Private Credit and Broadly Syndicated Loans?

A private credit loan is made by one fund or a small group of funds that hold it to maturity, while a broadly syndicated loan is arranged by a bank and sold to many institutional investors. That one difference drives the others:

• Price: a syndicating bank can change the spread while it's selling the loan, based on investor demand, which LCD calls price flex, while a private lender agrees the price up front. Private credit buyout loans averaged SOFR plus 502 over the three months through August 2026, 162 bps more than syndicated buyout loans, per PitchBook LCD data cited by Kirkland & Ellis.

• Covenants: most middle-market private loans keep a quarterly maintenance test, while syndicated and large-cap private loans mostly don't (question 4).

• Market share: private credit financed 214 US buyouts in 2025, 84 percent of the count, and 58 percent of the dollar volume, with the syndicated market financing the other 42 percent, per PitchBook LCD data in Kirkland's January 2026 update. Syndicated deals tend to be the bigger ones.

The sponsor pays the wider spread for a price that won't move and one lender to deal with, and the lender accepts a loan it can't easily sell in return for that spread and, in the middle market, a quarterly covenant. WSG's private credit interview questions post goes further on this seat.

17. What's a Unitranche, and How Does PIK Interest Work?

A unitranche is one loan with one blended rate that replaces separate senior and junior loans, and PIK interest is interest the borrower adds to the loan balance instead of paying in cash. When several lenders share it, an agreement among lenders often splits them into a first-out piece, which is paid first if things go wrong and earns a lower rate, and a last-out piece, which is paid after and earns more, as Wall Street Prep explains. A $300 million unitranche with a $150 million first-out piece at SOFR plus 350 and a $150 million last-out piece at SOFR plus 700 costs the borrower SOFR plus 525 on the whole loan.

PIK stands for payment in kind. Instead of paying interest in cash, the borrower adds it to the principal, so the debt compounds:

$100 million loan at 10 percent PIK	Year 1	Year 2	Year 3
Opening balance	100.0	110.0	121.0
PIK interest added	10.0	11.0	12.1
Closing balance	110.0	121.0	133.1
Cash interest paid	0	0	0

No cash leaves the company, which helps a borrower that's short of cash today. The cost is that the lender's claim grows 10 percent a year whether earnings do or not. On flat EBITDA of $25 million, leverage goes from 4.0x to 5.3x in three years.

18. If EBITDA Falls 30 Percent, Does This Loan Still Get Repaid?

Rerun the cash flow and the covenant ratios with lower earnings and the same debt: the loan stays current if cash flow covers interest and scheduled principal, and the lender keeps its protection if the ratios stay inside the covenants. State every assumption before you start, because the interviewer will test them:

• EBITDA of $50 million, falling 30 percent to $35 million

• $250 million of unitranche debt (5.0x) at a 9 percent all-in rate, which is SOFR plus 500 with SOFR rounded to 4 percent

• Amortization of 1 percent a year, or $2.5 million

• Capex of $5 million in both cases

• Cash taxes of $5 million in the base case and $2 million in the downside, because lower earnings mean a lower tax bill

• No change in working capital

• Covenants of 6.0x maximum leverage and 1.25x minimum FCCR, with FCCR defined as EBITDA less capex and cash taxes, divided by cash interest plus scheduled principal

A 30 percent drop in EBITDA still leaves $3 million after debt service, but FCCR falls to 1.12x and leverage rises to 7.1x.

The cash still covers interest and amortization in the downside, with $3 million to spare, so the loan keeps paying. But FCCR falls below 1.25x and leverage passes 6.0x, so both covenants break. That brings the borrower to the lenders to renegotiate, for a fee, a higher rate, or more equity, while the loan is still current, which is exactly what the covenants are for.

Repayment at maturity is the harder question. With 1 percent a year of amortization, almost all of the $250 million is still owed when the loan comes due, and a borrower at 7.1x with $3 million a year of spare cash can't repay that from cash flow. Full repayment then depends on refinancing or selling the company, which is harder well above the 5.5x average on large private credit buyouts in question 15.

Fit and Market Questions

19. Why Credit Rather Than Investment Banking or Private Equity?

Answer with the work itself: a credit analyst decides whether money goes out and on what terms, and stays with that decision while the loan is outstanding. Name one thing you've already done that looks like the work, such as reading a company's debt footnote or building a downside case, and leave hours and pay out of the answer. At a commercial bank, the same question often comes as "why commercial banking" or "why our bank," and the answer works the same way: name what the bank lends to and how its analysts are trained, and connect it to the credit work you want to do.

Don't say: "Private equity is too competitive, and credit has a better lifestyle."

Say: "I want to own the lending decision and then watch the loan through a downturn. When I read a company's 10-K, I go to the debt footnote first."

20. What's Happening in the Loan Market Right Now?

Give two or three current numbers with their dates and say what they mean for a lender, because the interviewer is checking whether you follow the market you'd be lending into. As of mid-October 2026, the numbers worth knowing are:

• SOFR: 3.89 percent on October 15, 2026, per the New York Fed.

• Private credit defaults: Fitch's US private credit default rate reached a record 6.3 percent for the 12 months through August 2026, per Fitch's release as posted by The Lead. Fitch counts interest deferrals, PIK switches, and maturity extensions under stress as defaults, and deferrals and PIK switches made up 47 percent of the defaults it counted over those 12 months, per Private Equity Wire.

• Syndicated loan defaults: Fitch's trailing 12-month US leveraged loan default rate was 3.9 percent in August 2026, per its September report.

• Refinancing: a record $12 billion of direct-lending deals moved to the syndicated market in the third quarter through late September, and those borrowers cut their spreads by 182 bps on average, per PitchBook LCD. When the syndicated market is open, private lenders lose borrowers to it.

These change monthly, so check SOFR on the New York Fed's page and the latest default figures the morning of the interview.

Don't say: "Rates are high and defaults are rising."

Say: "Private credit defaults are at a record on Fitch's count, and nearly half of those defaults are borrowers deferring interest or switching to PIK, which tells me cash interest is getting harder to cover. So I'd underwrite to a deeper downside case and look hard at whether a borrower can pay its interest in cash."