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.