Debt Market Update – Q2 2026

Headline Growth Masks Continued Selectivity

At first glance, Q2 2026 looks like a dramatic reacceleration in lending activity, with total venture debt volume reaching $44.2 billion, up 129% from Q1. Unfortunately, this headline may be misleading.

A single transaction – SpaceX’s $20 billion senior notes offering, priced in June to refinance debt assumed in its merger with xAI – accounted for the majority of the increase. Excluding this transaction, technology deal value was roughly flat to modestly higher at ~$24 billion, a 24% quarter-over-quarter increase.

The broader market picture remains more consistent with the selectivity that has characterized recent quarters than with a broad-based recovery.

In the technology sector, continued lender selectivity may be partially traced back to February’s “SaaSpocalypse,” when nearly $300 billion in SaaS market value was erased in 48 hours amid concerns that AI agents could hollow out enterprise software and recurring revenue models.

With an estimated $600 billion – $750 billion of private credit exposure to software, lenders continued tightening underwriting standards for traditional SaaS credits while capital flowed toward AI infrastructure and differentiated, AI-native borrowers.

Deal count seems to provide a more genuine story of market breadth, rising 23% from Q1 to 141 transactions, suggesting lenders may be slowly underwriting to a wider set of borrowers while remaining cautious around legacy SaaS exposure.

The healthcare sector staged a sharp recovery, with deal value rebounding to ~$2.7 billion from $0.4 billion in Q1, while transaction count increased 39% to 25 deals.

This recovery suggests the first-quarter caution around healthcare equity markets may have been somewhat transitory as both public and private markets appear to show signs of improvement.

Overall, Q2 appeared to reflect a continuation of a selective lending environment, with caution toward at-risk SaaS credits offset by an appetite for AI infrastructure and differentiated borrowers. While activity improved, the market remained challenging and highly dependent on credit quality and borrower differentiation.

To gain more insights into the venture debt market in Q2 2026, download the full report and read Capital Advisors Group’s Quarterly Debt Market Update.