The New Growth Engine: How Equipment Finance Powers the U.S. Manufacturing Resurgence

At the midpoint of 2025, investors continue to navigate a complicated market shaped by the potential for changes in monetary policy and ongoing public market volatility. Increasingly, investors turn to private credit for its ability to generate strong income and deliver valuation stability.

In 2024, private credit fundraising topped $209 billion, a 5% increase from 2023, reflecting sustained demand. Within the asset class, the direct lending segment continues to dominate, accounting for nearly 50% of new limited partner allocations. With an estimated $34 trillion addressable market for the broader private credit space¹, including managed private credit assets, the asset class has quickly evolved into a core allocation within investors’ alternatives portfolio.

However, while direct lending has fueled much of the growth over the past decade due to banks’ retrenchment from leveraged lending and the rapid growth of private equity, there are several rapidly developing segments within private credit². Specialized lending verticals, including equipment finance, are emerging as standout opportunities.

Equipment finance is a focused form of debt for asset-heavy businesses, with borrowers drawing capital for mission-critical equipment to grow and expand operations. This space covers manufacturing and production machinery, laboratory systems, robotics, hardware-as-a-service, diversified energy infrastructure, and other operational essentials. Driven by the trend of onshoring in a complicated environment for global supply chains, equipment finance continues to gain traction.

Onshoring and supply chain realignment are supported by a constructive environment for U.S. manufacturing, including federal legislation like the CHIPS and Science Act. As a result, U.S.-based manufacturing construction spending has more than tripled since 2021, with over $225 billion in annualized spend as of Q1 2025, including investments across artificial intelligence (“AI”) & data infrastructure, frontier technology, energy infrastructure, and life sciences³. As an example, the growth in demand for data centers, fueled by AI deployment, is driving demand for power generation assets and cooling equipment, creating financing needs aligned with long-term innovation and sustainability⁴.

Importantly, equipment finance is collateralized by mission-critical physical assets with an underwritten value for those assets in a known secondary market, delivering downside protection for lenders. This structural feature contributes to greater credit stability and can mitigate losses in a stressed scenario. Generally, equipment finance facilities are immediately amortizing, which facilitates quicker payback from borrowers and allows lenders to recycle capital efficiently.

As institutional allocators and financial advisors seek differentiated sources of return within private credit, equipment financing presents a compelling complement to traditional corporate lending strategies. By virtue of its asset-backed nature, structural benefits, and alignment with evolving capital-intensive sectors, equipment finance can improve portfolio diversification. Selecting managers with dedicated equipment finance expertise can be a differentiator as they bring a strong and established origination network, sector-specific knowledge, and disciplined underwriting that further mitigates risk.

Investors looking to add equipment financing exposure to enhance portfolio resilience can do so through a range of structures, including publicly traded BDCs and private credit funds with dedicated equipment finance strategies. As the private credit landscape continues to evolve, emerging managers with specialized approaches are increasingly offering differentiated return potential compared to more traditional strategies.