Software companies are entering a period of significant financial recalibration as of February 2026. Higher borrowing costs and intensified lender scrutiny have led many firms to delay or abandon debt fundraising efforts. The software sector is currently facing a sharp divide. While the broader tech industry reached record debt issuance levels in 2025, representing 16.7% of global non-financial corporate bonds, smaller and riskier software firms are hitting a wall. Lenders are increasingly concerned that rapid AI advancements could dismantle existing software-as-a-service (SaaS) business models. This anxiety is manifesting in credit spreads, which have widened by 20 to 50 basis points for software names in recent weeks. Market data shows that approximately 50% of software sector loans now carry B- or lower credit ratings. This concentration of high-risk debt has made lenders cautious, with many demanding stricter covenants and higher yields to protect against potential AI-driven defaults. The "maturity wall" is becoming a critical focus. While only 0.5% of software loans are due for refinancing in 2026, that figure jumps to 6% in 2027 and peaks in 2028. This upcoming surge is forcing companies to preserve cash now rather than seeking new credit in an expensive market. Interest rates for business loans remain elevated, with average rates ranging from 10.75% to 22.50% depending on credit quality. These high costs are particularly difficult for software firms whose products are perceived as easily replicable by new AI coding agents. The private credit market, which holds an estimated $600 billion to $750 billion in software exposure, is under localized strain. This has led to a noticeable slowdown in new financing deals as firms wait for market stability and clearer signs of which business models will survive the AI shift. In contrast, "hyperscalers" and massive infrastructure providers are borrowing heavily to fund AI development, raising over $121 billion in 2025 alone. This massive capital absorption by top-tier firms is further crowding out smaller software borrowers. For mid-sized and smaller software entities, the current strategy is one of "wait and see." Management teams are prioritizing operational efficiency over debt-fueled growth, aiming to strengthen balance sheets before the 2027 refinancing cycle begins.