FAQ: private credit basics

Private credit is lending by non-bank lenders, negotiated directly with the borrower and usually held rather than traded. It covers direct loans to companies, real estate credit, asset-based lending and specialty finance. See what direct lending is.

For speed, flexibility, certainty and structuring that a bank may not offer. Banks have pulled back from some lending under regulatory constraints, particularly transitional real estate and companies whose earnings do not fit a standard cash-flow loan. Borrowers usually pay more for a private loan, in exchange for a loan that fits.

Senior means the loan is paid first among the borrower’s debts. Secured means it has a security interest in specific collateral. First lien means that security interest ranks ahead of any other lender’s claim on the same collateral. Together they give the lender the first claim on the collateral and the strongest hand if a plan goes wrong.

Mezzanine sits below senior debt and is often secured by a pledge of the equity of the borrower rather than the asset itself. It is paid after the senior lender and priced higher for that risk. Its protection comes from control rights set in an intercreditor agreement.

Permanent capital has no fixed date by which it must be returned to outside investors. For a borrower it means a lender that does not need to sell down a position to close and can evaluate an extension on its merits. See lending from permanent capital and our perspective on it.

Not inherently. Risk depends on the position, the collateral, the leverage and the documents, not on who the lender is. A senior secured loan at conservative leverage can be safer than a bank loan with thin coverage. Private loans often price higher because they involve complexity or speed, not necessarily more risk.

A failure to meet a promise in the loan agreement, such as a financial test or a reporting deadline. It usually becomes an event of default, which gives the lender its remedies, though lenders often grant a waiver or amendment when the issue is understood. See covenants explained.

The lender’s options range from a waiver or amendment to forbearance, restructuring and, as a last resort, enforcement. Most problems are resolved by negotiation. See workouts and enforcement.

An agreement by the lender not to exercise remedies for a period while the borrower fixes a problem, usually in exchange for conditions such as new equity, added reporting or a sale process. See defaults, forbearance and restructuring.

It depends on the collateral and the state. Real estate is typically enforced by foreclosure, judicial or nonjudicial, sometimes with a receiver; personal property by a sale under the Uniform Commercial Code; equity pledges by a UCC sale of the pledged interests. See enforcement and remedies.

A borrower’s voluntary transfer of the property to the lender instead of a foreclosure, usually in exchange for a release of some or all claims. It can save time and cost for both sides, but the lender takes the property subject to existing liens, so title work matters.

Filing triggers an automatic stay that pauses enforcement. A secured lender keeps its claim on the collateral and is entitled to protection of its interest, but timing and outcomes depend on the court. Seniority and properly perfected security are what protect the lender. See enforcement and remedies.

No. Caldrion is a single family office: it invests only its own capital, has no outside investors or clients, and does not offer securities. Nothing in this knowledge base is an offer of securities.

Our thesis is set out in Senior, secured and patient. Market notes cover transitional real estate lending and asset-based lending, and the glossary defines the terms used here.