Private Credit Builds a Technology Lending Machine
Recurring-revenue loans, data-driven monitoring, and fund structures built for scale are turning software lending into an asset class of its own.
Wikimedia Commons · CC BY-SA 4.0Lending against software revenue has graduated from niche to machine. Private credit funds have institutionalized the recurring-revenue loan, underwritten on retention and unit economics rather than assets, and the category now commands dedicated funds, specialized covenants, and its own secondary market.
The underwriting is genuinely different. Lenders plug into borrowers' billing and usage systems, monitoring the metrics that predict software revenue with a granularity traditional credit never had. Covenants trip on retention and burn rather than EBITDA, and interventions come earlier and softer.
The borrower base has broadened beyond venture-backed companies to the vast middle of bootstrapped and lightly capitalized software businesses, for whom debt against durable revenue beats dilution. Origination increasingly flows through banks' technology groups and specialized brokers rather than sponsor relationships alone.
The untested variable is a genuine downturn in software spending. Portfolio construction assumes retention behaves as modeled; a correlated shock to renewals would test both the models and the workout capacity of lenders who have mostly known benign conditions. The asset class's first real recession will be its accreditation exam.