Perspective
Credit is Available, but Terms are Getting More Selective: What Borrowers and Lenders Need to Know as Financing Conditions Shift
November 10, 2026
Authors
Jesse Rubinstein
Director, New York
jrubinstein@goulstonstorrs.com+1 212 878 5142
Frank Ditta
Director, New York
fditta@goulstonstorrs.com+1 212 878 5121
Steven Ficurilli
Associate, New York
sficurilli@goulstonstorrs.com+1 212 878 5064Related Expertise
On September 16, 2026, the Federal Reserve raised the federal funds rate for the first time since 2023, lifting the target range to 3.75%-4.00%. The 10-year Treasury yield has pushed past 5%, reaching roughly 5.3% in mid-October, and the 30-year hit its highest level since 2004. The Federal Reserve held rates steady in October, but with the midterm elections now behind us, one further increase is expected before year-end.
For borrowers and lenders across the leveraged loan, private credit, asset-based lending, and commercial real estate markets, the “higher for longer” narrative that many had hoped would fade by now instead looks increasingly entrenched. The market is not closed, but it is more selective. Credit quality, collateral and financing structure increasingly shape who can borrow and on what terms. For floating-rate borrowers, higher benchmark rates increase debt-service costs, and with leveraged loan and private credit maturities concentrated in 2027 and 2028, the cost and structure of replacement financing is particularly important heading into the new year.
Key takeaways
- A borrower’s credit profile increasingly determines the availability and terms of financing.
- Structure and monitorable collateral can help unlock liquidity when cash-flow lending is tighter.
- Borrowers approaching 2027 or 2028 maturities should evaluate options early, while they retain flexibility.
How higher rates are changing credit decisions
Borrowers should be (and the most competitive borrowers already are) assessing financing options based on more than just the current interest rates. Availability of capital, covenant flexibility, committed liquidity and collateral requirements are more important than ever in determining whether a facility meets the business’s needs heading into or refinancing in the current market.
Borrowing costs are rising even as credit spreads remain below average
Credit spreads (the premiums investors demand to hold riskier corporate debt over Treasury bonds), remain below their historical average, suggesting that the market is not pricing in widespread deterioration in corporate credit quality. Higher benchmark rates nevertheless increase debt-service costs for floating-rate borrowers and those taking on new or refinanced debt, even where their credit quality and long-term exit values remain well situated. For borrowers, that means quarterly debt service is climbing even where long-term exit value and credit quality have not changed, and both borrowers and lenders should expect financing and valuation discussions to reflect that gap.
Borrower quality matters more
Credit quality now matters more than it has in over a decade. Lenders find themselves competing for borrowers with stronger credit, rewarding such borrowers with a deeper pool of financing options and competitive terms, while weaker credit borrowers are finding themselves in a much more selective market with higher pricing and less flexible terms. A borrower’s own credit profile, not just overall market conditions, will increasingly determine whether financing is readily available or requires real work to source.
Structure and collateral can make a difference
Structure and collateral are now doing the work that price alone used to do. While competitive rates are important, the best-equipped lenders are winning and keeping mandates by fitting financing to a deal’s specific needs, whether through delayed draw term loans, split-lien structures, or ABL/term loan combinations. Borrowers with clean, monitorable collateral are finding real liquidity even where general cash-flow lending has tightened, and the Borrowers that come to the table thinking about structure and collateral packaging as much as rates find themselves in the best positions to navigate the current market.
Rate increases affect lenders differently
For lenders, the rate hike is not a uniform tailwind. Banks with asset-sensitive balance sheets stand to gain, at least near term, while others will see rising deposit costs compress margins faster than loan yields improve, meaning pricing discipline and funding strategy, not just the base rate, will separate winners from laggards this cycle.
The practical takeaway: expect the conversation to center less on whether credit is available and more on what structure, collateral, and credit profile will unlock the best terms.
When a Borrower Comes Under Pressure: Early Considerations for Lenders
Stress is building in pockets of the market, even if it has not yet become systemic, and lenders should not wait for a default or covenant breach to start watching for it. That stress is also showing up faster, and more unevenly, than headline market conditions would suggest, which argues for tightening monitoring now rather than waiting for broader trends to confirm what individual credits may already be showing. The early conversation with a stressed borrower should cover collateral and borrowing-base discipline, covenant headroom, whether distress is sector- or company-specific, and whether an amend-and-extend, new-money infusion, or restructuring will ultimately be needed.
Extend, Refinance or Restructure? The Questions Lenders Are Asking About Loan Maturities
With a meaningful share of leveraged loan and private credit maturities concentrated in 2027 and 2028, the window to refinance on favorable terms is open now, but it is not open equally to every borrower. Borrowers that moved to private credit when the syndicated market was tight now have a genuine path back to leveraged loan facilities, if their credit supports it, as renewed competition between the two markets is once again working stronger in borrowers’ favor on both price and terms, even as the general pricing of the market has increased across the board. This window of competition will not stay open indefinitely as the market corrects itself. A period of dislocation in private credit is expected over the next two years, as a wave of loans are currently set to mature between 2027 and 2028. Borrowers and lenders who negotiate an amend-and-extend now, while terms are still workable, are better positioned than those who wait for the upcoming maturity date to force a conversation. And when reset is unavoidable, private credit lenders are increasingly choosing to foreclose and become owners themselves rather than work out exits, trading a write-off for equity, new capital, and an extended runway.
The decision for a borrower approaching a 2027 or 2028 maturity increasingly comes down to three questions:
- Can the business extend on existing terms?
- Can it refinance into a more favorable market?
- Does the capital structure need a reset through amend-and-extend, liability management, or restructuring?
Getting ahead of the upcoming wave of maturities is essential. Engaging early gives borrower and lenders alike the ability to explore the most avenues before hands are forced.
CPACE and the Capital Stack
Real estate owners facing the same rate pressure have a capital-stack-specific tool available in Commercial Property Assessed Clean Energy (CPACE) financing. CPACE has traditionally bridged capital-stack gaps for environmental improvements and other long-term investments in existing assets and can also support new construction and ground-up development, but its real value today is as a way to reprice the capital stack. With mortgage, mezzanine, and preferred equity pricing having risen so sharply, incorporating CPACE financing can meaningfully reduce an owner’s blended cost of capital, notwithstanding the structural complexity of layering in such supplemental financing. Owners should also look at CPACE as a refinancing tool for prior qualifying capital expenditures, not only new environmental retrofits, as a way to retain maximum flexibility. The owners getting the most value from CPACE are the ones who evaluate it as a capital-stack decision, not a sustainability add-on, weighing it against their mortgage, mezzanine, and preferred positions before assuming the cheapest source of debt is already locked in. With rates expected to increase, this flexibility in the capital-stack decision can make a real difference for qualifying projects.
What borrowers and lenders can do now
None of this points to a closed credit market, but it does point to a more demanding one. Leveraged loans returned 2% in Q3 2026, their best quarterly return since Q2 2025, and asset-based lending commitments and demand are both climbing. Capital is available, even if increasing rates suggest otherwise. What has changed isn’t the availability of credit, but its dispersion: pricing, availability, and structure now vary far more by credit quality, sector, and collateral than they did a year ago, and that gap will likely widen further if the Fed delivers the widely expected additional hike in December. The borrowers and lenders who engage early on structure, covenant headroom and refinancing strategy, rather than waiting for a maturity date or a covenant breach to force the issue, will have materially more options when it matters.
Please contact Jesse Rubinstein, Frank Ditta, Steven Ficurilli, or a member of our Finance Group to discuss how these trends may affect your financing strategy.
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