Private credit markets are under growing stress, fuelling fears of a financial crisis that could spill over to the real economy. But a closer look at the evidence suggests that the risks are less severe than in previous cycles, and that predictions of a meltdown are running well ahead of the facts.

Over the past few weeks, headlines have focused on emerging signs of stress in the US$2 trillion private credit market, particularly among non-traded business development companies. These funds, which lend to small- and medium-size US businesses, now hold roughly US$270 billion in assets.

But fe...