Software Lending Declined Sharply in 2026
Private credit lenders shifted focus to existing portfolio firms amid concerns over artificial intelligence disruption.
Updated on Oct. 8, 2026 in Software
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Private equity-backed direct lending volume for software companies fell to 15% in 2026, marking a significant drop from 22% in 2025. Investors increasingly prioritized supporting current portfolio companies over new investments as fears mounted regarding AI impacts on subscription revenue models.
Why it matters
The slowdown reflects growing investor anxiety that AI-driven disruption could undermine the stability of traditional software subscription business models. Consequently, private credit lenders have pulled back from new deals to focus on protecting their existing software assets.
In 2026, software companies accounted for 12% of PE-backed direct lending deals by count and 15% by total volume. Major firms utilized amend-and-extend agreements for significant debt, including $4.3 billion for Proofpoint and $1.66 billion plus €450 million for Sophos.
The players
Sophos
Sophos is a global cybersecurity software company that focuses on producing security software for communication endpoints, encryption, and network security.
Proofpoint
Proofpoint is a cybersecurity firm that provides software-as-a-service and products for email security, data loss prevention, and social media protection.
Imprivata
Imprivata is a digital identity company that provides software solutions primarily for the healthcare industry to manage secure access to applications.
Comvest
Comvest Partners is a private investment firm that provides flexible financing solutions to middle-market companies across North America.
Calero
Calero is a software provider that specializes in technology expense management and communication lifecycle management services for enterprise clients.
The details
Borrowers have increasingly turned to amend-and-extend agreements to delay loan maturities, with Imprivata pushing out deadlines on $1.2 billion of first-lien debt during summer 2026. Investment bankers are currently tapping dozens of lenders to secure financing for remaining software borrowers as firms like Comvest provide targeted refinancing for companies like Calero.
Timeline
Software deals reached a recent peak of 27% volume in 2020 and 2022.
AI-induced market concerns began driving private credit shifts in Q1 2026.
Proofpoint completed a $4.3 billion amend-and-extend in July 2026.
Sophos finalized its debt amend-and-extend in early October 2026.
Billions in software loans are set to mature in 2027 and 2028.
The Tech Race
The retreat from software lending marks a departure from the high-growth reliance on software-as-a-service models seen during the early 2020s. This recalibration signals a broader technological pivot where capital flows away from legacy subscription systems and toward firms proving AI-resilient business models.
Users of enterprise software may notice reduced capital investment in new features as companies prioritize debt servicing over research and development. The restrictive lending environment could also lead to higher subscription costs as software providers seek to preserve margins to meet stricter credit obligations.
The takeaway
The pivot in private credit suggests that the era of easy debt for all software companies has ended, with investors now demanding greater proof of long-term viability. Borrowers and investors should prepare for a period of intensive debt restructuring as upcoming maturity walls loom in 2027 and 2028.
What happens next
Billions of dollars in software-related loans are scheduled to reach their maturity dates throughout 2027 and 2028, likely necessitating further restructuring or refinancing activity.
Further reading
For more background on industry trends, see the Software section.
Live Poll
Is the decline in lending to software companies a sign of overreaction to AI development?