The underwriting and credit vocabulary private capital teams use daily: DSCR, covenant breach, capital stack, and more.
The maximum amount a lender will advance against a pool of eligible collateral (receivables, inventory, or loan assets), recalculated periodically as the underlying collateral changes.
The layered combination of debt and equity used to finance a deal, ranked by seniority and risk, from senior secured debt at the bottom to common equity at the top.
When a borrower fails to meet a financial or operational condition specified in a loan agreement (such as a minimum DSCR or maximum leverage ratio), giving the lender contractual remedies.
The internal governance body (typically senior lending or credit officers) that reviews and approves loan originations, renewals, and material credit decisions before they close.
A secure, access-controlled repository for the documents involved in a deal (financials, leases, title, diligence reports) shared among a deal team, counterparties, and their advisors.
A ratio measuring a property or borrower's net operating income against its total debt obligations, the core metric lenders and credit committees use to judge whether cash flow can cover debt payments.
The agreed sequence in which distributable cash flow is allocated among a deal's equity investors, typically returning capital and a preferred return before splitting upside with the sponsor.
A broader coverage metric than DSCR: it measures a borrower's ability to cover all fixed obligations (debt service, plus lease payments, capex reserves, or other fixed charges), not just debt service alone.
The formal write-up presented to an investment committee summarizing a deal's thesis, underwriting, risks, and terms, used to secure approval to proceed.
A non-binding document outlining the key proposed terms of a deal (price, structure, exclusivity, and timeline) signed before full diligence and definitive agreements.
A stress-testing scenario mode that models a deal's performance under a broad macroeconomic disruption (a rate shock, a demand collapse, or a systemic credit event) rather than an asset-specific downside case.
The primary marketing document a seller or broker distributes to prospective buyers or lenders, summarizing a deal's financials, asset details, and investment thesis.
A deal structure where an operating business is acquired using a significant proportion of borrowed money, with the acquired company's own cash flow and assets used to service that debt.
A form of interest or preferred return that accrues to the principal balance instead of being paid in cash, common in mezzanine debt and preferred equity structures.
A software pricing model that charges per named user (seat), typically layered on top of a flat platform fee, rather than charging per deal, per module, or as a single flat license regardless of team size.
The blended cost of all the capital sources funding a deal (debt and equity) weighted by their proportion of the total capital stack.