Abstract
Research on private debt has examined funds, contracts and returns; much less is known about the firms that receive direct-lending finance. This paper moves the analysis to the borrower side through a population-level study of Italian private debt transactions. It combines more than ten million Italian firm-year observations for 2013-2023 with proprietary deal data from the Italian Association of Private Equity, Venture Capital and Private Debt (AIFI), and estimates logit selection models to identify the characteristics associated with first-time private debt funding. The estimates reveal a sharply bounded borrower profile. Private debt investors favour larger, moderately profitable and moderately riskier firms with intermediate asset tangibility, while avoiding firms that are persistently loss-making, wholly intangible, highly collateralised or excessively risky. The evidence is consistent with private debt operating not as a simple substitute for bank lending but as a specialised contracting arrangement for firms whose risks are non-standard yet contractible: too opaque, growth-oriented or insufficiently collateralised for the lowest-cost bank segment, but sufficiently large and cash-generative to bear the fixed costs of due diligence, covenant design and monitoring.