Small Business Credit Default Risk Rises Despite Market Dip

While the broader private credit default rate dropped to 2.41 percent, borrowers under $25M EBITDA face tightening conditions.

Updated on Oct. 29, 2026 in Economic Indicators

Isometric editorial illustration showing a single industrial shipping container on a concrete platform, representing uneven economic credit stability. — Small businesses with less than $25 million in EBITDA faced increased default risk in the third quarter of 2026, even as the overall market default rate declined. AI Illustration. Upload story photo >

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The U.S. private credit default rate declined to 2.41 percent in the third quarter of 2026, down from 2.51 percent in the second quarter. This index, which tracks 746 senior-secured and unitranche loans, highlights shifting stability across different borrower size segments.

Why it matters

While the overall default rate improved, credit stability diverged significantly based on company size and sector. Smaller borrowers face rising pressure, even as larger firms experience a notable easing in default risk.

The Proskauer Private Credit Default Index recorded a 2.41% default rate for Q3 2026, a slight improvement over the 2.51% observed in the second quarter. The data set covers 746 loans with an original principal value of $205.7 billion, though trailing 12-month default rates remain elevated.

The players

Proskauer Private Credit Default Index

A performance benchmark tracking senior-secured and unitranche loans in the U.S. credit market.

The details

The index reveals a split in performance: companies with EBITDA under $25 million saw default rates rise from 1.9% to 2.2%. In contrast, mid-sized companies between $25 million and $49.9 million saw defaults dip from 3.4% to 3.3%, and the largest firms with $50 million-plus in EBITDA saw the sharpest improvement, falling from 2.4% to 1.7%. The overall index trend is partially offset by rising defaults specifically within software and technology borrowers.

Q2 2026 saw a default rate of 2.51 percent.
Q3 2026 saw a default rate of 2.41 percent.

Market Landscape

This performance update follows the established tracking patterns of the Proskauer Private Credit Default Index. It marks a departure from broader stability by highlighting clear size-based segmentation in credit risk.

Operators should note that borrowing conditions are tightening for smaller entities despite overall market improvement. Review your current debt service coverage ratios and watch for continued volatility in the technology sector.

The takeaway

Smaller companies face growing default risks, suggesting a need to prioritize cash liquidity in the current cycle. Monitor your trailing 12-month performance metrics to identify early warnings before they impact your access to unitranche or senior-secured debt.