Growth Lending Terms & AI impact 2026

Despite headlines predicting SaaSpocalypse and private credit’s demise, venture lending is seeing record levels of capital deployment. Following the 2023–2025 upheaval of rate hikes, bank failures, and evaporating equity flows, pricing and risk appetite have stabilized and venture lending is booming…

• The AI Funding Boom: Astronomical equity inflows have significantly lifted credit quality, and hardware business models create a strong use case for debt capital

• Portfolio Cleansing: Weaker borrowers have [largely] been flushed out of venture debt portfolios

• Late-Stage Demand: Strong companies are securing debt to fortify balance sheets ahead of exits

  
  

That said, a dominant market theme is the widening performance gap between the strongest lenders and those still seeing drag from legacy portfolios. Lenders with late-stage focus and scale, low cost and stable capital bases, and portfolio challenges largely in the rearview, are capitalizing on excellent deployment conditions, while those with legacy exposure are still stickhandling elevated portfolio health issues and facing weakness in their LP bases.

Leading lenders...

• Are reporting sub-1.0% non-accruals (a massive improvement over 2024/2025)

• Have benefitted from a lower mix (or higher quality mix) of SaaS vs. non-SaaS borrowers

• Are seeing higher level of loan prepayments, signaling that borrowers are successfully raising equity or exiting

Struggling lenders...

• Are still dealing with workouts with mid-stage, cash-burning companies that don't have viable re-fi options, or compelling exit alternatives

• Are delivering underwhelming returns, creating challenges with new fundraising

 Other Observations

• AI anxiety is pervasive, and underwriting frameworks are still adapting

• Lenders are diversifying portfolios and chasing active equity flows

• Usage-based, AI-native software companies may demonstrate less predictable revenues, challenging traditional lending models

• Traditional SaaS is still viable, and in many cases is seeing expanded TAM from AI tools, but lenders are focused more than ever on data moats, verticalization, and positive EBITDA

• Loan closing cycles remain prolonged, especially for borrowers that haven't raised equity in 12+ months

• AI underwriting tools are generating excessive diligence questions with unclear results; will AI lead to the long-term commoditization of credit decisions?

• In a bifurcated market, prospective borrowers should create financing optionality and secure backup options