Caprolactam-derived solvents for use as processing solvents and/or coalescing agents for polyurethane dispersions (PUDs). The caprolactam-derived solvents are suitable for processing solvents and coalescing agents in PUDs created through traditional PUD manufacturing processes or as coalescing agents in PUDs created through solvent-free PUD manufacturing processes. Blends of more than one caprolactam-derived solvent may be used as the processing solvent and/or coalescing agent.