Private credit refers to loans made by non-bank lenders—such as private-equity firms, asset managers, and hedge funds—directly to companies, and it’s exploded in the decade-plus since the financial crisis. Marquee names in the space have grown growing to titanic proportions: Think KKR, Blackstone, and Ares Management. These players often operate outside of traditional regulatory frameworks in transactions that are too risky or unconventional for traditional banks.

As banks like Dimon’s have been forced by regulations to reduce corporate lending, private credit has become a go-to source for everything from leveraged buyouts to business expansions, offering attractive returns but also carrying higher risks.

Dimon’s remarks also came in response to an analyst’s question about whether JPMorgan itself is looking to deepen its own investments in the private-credit space, as reported by The Wall Street Journal. JPMorgan had a chance to own a private-credit operation but went in another direction in 2008, reportedly to Dimon’s chagrin.

“I would say it’s not high in my list,” Dimon said about JPMorgan buying a private-credit firm, adding he would have a “slight reluctance,” depending on the acquisition target. Then he offered a nuanced explanation, reiterating “credit spreads are very low.”

Dimon was suggesting that credit spreads—the extra yield lenders demand for risk—have shrunk to levels that no longer compensate for potential losses. Coupled with looser underwriting and increased leverage, Dimon implicitly suggested we’re seeing echoes of risk cycles that preceded past credit busts. In flat terms: Too much capital is chasing too few quality opportunities, driving up risk while driving down returns.

Later in the day, as Dimon taped an episode of the “Acquired” podcast at Radio City Music Hall, he said private credit is “one place that people worry has unknown leverage.” JPMorgan declined to comment beyond Dimon’s comments on the earnings call.

Why it matters

Dimon’s remarks are notable for several reasons, ranging from the impact on corporate borrowing to macroeconomics. A peaking private-credit market suggests “easy money” is ending—businesses may soon face stricter lending standards and higher costs, which could dampen expansion or M&A activity. Many pension plans, endowments, and affluent investors have loaded up on private credit for yield. If defaults rise or liquidity dries up, retirement plans and wealth portfolios could suffer unexpected losses at inconvenient moment in the economic cycle, or worse.

Private credit isn’t subject to the same regulations or oversight as banks, raising contagion risk if the market seizes up. Dimon is essentially signaling that what looks like healthy innovation can morph into a vulnerability if risk is mispriced en masse. Dimon’s warning also comes in a context of elevated asset prices and policy uncertainty, when monetary policy is in flux and economic growth is cooling—a recipe for for a credit accident cocktail.

The impact on your business

A peak for private capital would signal tighter lending ahead: Companies—especially mid-sized and riskier firms—may find it harder or more expensive to borrow. This could slow expansion, hiring, and deal-making. As private lenders pull back, traditional banks may regain market share, but with stricter terms and higher scrutiny.

Many pension funds, endowments, and even high-net-worth individuals have flocked to private credit for its high yields. If the market cools, future returns may disappoint, affecting retirement savings and investment portfolios. Private-credit investments are less liquid than stocks or bonds. In a downturn, investors may struggle to cash out or face losses if defaults rise.

Most ominously, a wave of defaults in private credit could spill over into the broader economy, especially if highly leveraged companies start to fail. Dimon’s warning is a reminder that financial innovation can sow the seeds of instability if left unchecked.

Dimon’s warning is a signal that the era of easy money and rapid growth in the private-credit market may be ending. For executives, business owners, and upper middle class investors, it’s a cue to reassess borrowing strategies, investment allocations, and risk management. If Wall Street’s hottest trend cools, it could impact everything from business expansion to retirement security.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.