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European private credit shops are eyeing a growing opportunity to deploy their bulging piles of capital — the $2.5trn global disparity between demand for trade finance and the supply of lenders.

Trade finance includes an array of funding options all geared towards helping companies engage in international and domestic trade. It’s a $4trn asset class that includes working capital finance — a type of asset-backed lending used to cover companies’ short-term operations and support healthy cash flow.

Demand for working capital finance has surged in recent years as global trade recovers from Covid-19, but concerns over increased market risk has made bank financing harder to find, especially for sub-investment grade (IG) borrowers. And in a tale as old as 2008, where the banks fear to tread, private credit is usually eager to get involved.