The language of private credit.

Terms

Alphabetized reference

Asset-Based Lending

Lending secured by identifiable business assets — receivables, inventory, equipment, or contracted revenue streams — rather than by enterprise value alone. Advance rates are set against the liquidation value of that collateral, not against projections.

Cash Flow Coverage

The relationship between a borrower's recurring operating cash flow and its scheduled debt service. It is the first test we run: if repayment depends on refinancing or growth rather than existing cash generation, the credit does not clear.

Collateral Coverage Ratio

The value of pledged collateral divided by the outstanding loan balance. A ratio above one means the position is over-collateralized, providing a cushion if realized recovery values fall below appraised values.

Contractual Repayment

Repayment governed by a fixed schedule of principal and interest set out in the loan agreement rather than by an exit event. Contractual amortization returns capital steadily and makes credit deterioration visible early.

Covenant

A binding term in a loan agreement requiring a borrower to maintain defined financial conditions or refrain from specified actions. Covenants are the mechanism that lets a lender intervene before a problem becomes a loss.

Credit Box

The written set of borrower, collateral, structure, and pricing parameters a lender will transact within. A disciplined credit box is defined before deal flow arrives so that individual opportunities are measured against a standard rather than against each other.

Downside Protection

The structural features that determine what a lender recovers if a borrower underperforms — collateral, security position, guarantees, amortization, and covenants. It is underwritten at origination, not negotiated after stress appears.

Duration (Private Credit)

The length of time capital remains outstanding in a given loan before it is repaid. In private credit, duration drives both liquidity and risk: the longer capital is committed, the more a lender is exposed to conditions it could not underwrite at the outset.

Lower Middle Market

Established U.S. operating businesses that are too large for consumer or small-business credit products and too small to be served efficiently by banks and syndicated markets. The financing gap in this segment is structural, not cyclical.

Mark-to-Market Risk

The risk that a holding's reported value moves with market pricing rather than with the underlying borrower's performance. Short duration, held-to-maturity loan positions limit this exposure because value is realized through repayment.

Preferred Return

A threshold rate of return that limited partners receive on contributed capital before the manager participates in profits. It aligns the manager's compensation with investor outcomes rather than with deployment volume.

Private Placement Memorandum (PPM)

The controlling offering document for a private fund, setting out strategy, terms, fees, conflicts, and risk factors. Any offer of interests in the Fund is made solely through the PPM and its related documents.

Regulation D / Rule 506(c)

The federal exemption that permits a private fund to raise capital without registration while publicly discussing the offering, provided every investor is an accredited investor whose status has been verified. Verification is completed prior to investment.

Revenue-Based Lending

Credit extended against a business's recurring revenue, with repayment sized to a defined share of collections. Repayment tracks actual business activity, which shortens the feedback loop between performance and credit outcome.

Short Duration Strategy

A strategy in which capital is deployed into instruments that repay over compressed timeframes and is then reassessed and redeployed. Frequent repayment points create recurring opportunities to re-underwrite credit quality and reprice risk.

Specialty Finance

Non-bank lending built around a specific asset class, collateral type, or borrower profile that requires dedicated underwriting capability. The return in specialty finance comes from execution and structure, not from taking more risk.

Underwriting Discipline

The consistent application of a single credit standard across every opportunity, including the willingness to decline the majority of them. Discipline is measured by what a lender passes on, not by what it funds.