A loan is a promise, and the documents are where the promise is written down. Most of what protects a lender, and most of what gives a borrower room to run its business, lives in the paper rather than in the headline rate. This chapter explains that paper: what the main documents are, how the commercial terms are set, and how the protective machinery works. This overview introduces the chapter and links to each entry in it.
From conversation to closing
A private loan usually passes through three stages of documentation, each more detailed and more binding than the last.
| Stage | What it is | Binding? |
|---|---|---|
| Term sheet | A summary of the commercial terms: amount, collateral, pricing, term, key covenants and conditions | Usually non-binding on the loan itself; confidentiality, expense and exclusivity clauses are often binding |
| Commitment letter | A more formal undertaking to lend, subject to stated conditions | Binding, subject to its conditions; not every private loan uses one |
| Definitive documents | The credit or loan agreement, security documents, guarantees and any intercreditor agreement | Binding on signing and closing |
At Caldrion, a term sheet follows the process published on our process page: if there is a fit, we sign an NDA promptly, work through the questions that matter and propose terms approved by our investment committee. Decisions are made by a small internal investment committee that meets weekly. We need no outside approvals and no fundraising to close. The entry From term sheet to funding walks through what happens after the term sheet is signed.
The documents in a typical closing set
- Credit agreement or loan agreement. The core contract: the amount, how and when it is drawn, interest, fees, repayment, representations, covenants, events of default and remedies. Real estate loans often use a loan agreement paired with a promissory note; corporate loans usually use a credit agreement.
- Promissory note. The borrower’s written promise to repay, often short and referring back to the loan agreement.
- Security documents. The mortgage or deed of trust for real estate; a security agreement for personal property such as receivables, inventory and equipment; pledge agreements over equity; and account control agreements over bank accounts. See Collateral, security and guarantees.
- Guarantees. Promises by a parent, sponsor or principal to pay or perform if the borrower does not, ranging from full payment guarantees to narrow “bad-boy” carve-outs.
- Intercreditor or subordination agreement. Where there is more than one lender, the contract that sets who gets paid first and who controls enforcement. See Intercreditor agreements.
- Fee letter. Often kept separate so that fees stay confidential.
- Closing deliverables. Organizational documents, resolutions, legal opinions, title policies, surveys, insurance certificates, lien searches and perfection filings.
The commercial terms
The economics of a loan are not one number. They are a combination of a floating or fixed rate, a spread, a floor, upfront and back-end fees and, sometimes, original issue discount. Our published pricing is SOFR + 600–900 bps, or a fixed-rate equivalent, with an origination fee of 1–2%; the criteria page shows the full table. The entry Pricing, fees and OID explains how those pieces combine into an all-in yield, with worked arithmetic.
How the loan is repaid matters as much as what it costs. Amortization, interest reserves, payment-in-kind interest and prepayment terms are covered in Amortization, call protection, PIK and interest reserves. Our published term is 12–36 months, with extension options.
The protective machinery
Three mechanisms do most of the work of protecting principal in a senior secured loan:
- Collateral and its perfection. A security interest is only as good as its filing, its priority and the lender’s practical ability to realize it. See Collateral, security and guarantees.
- Covenants. Promises about what the borrower will do, will not do and what its financial condition will be. They are early-warning systems rather than traps. See Covenants explained.
- Availability controls. In asset-based loans, the amount a borrower may draw moves with the collateral through a borrowing base. See The borrowing base explained.
The entries in this chapter
| Entry | What it covers |
|---|---|
| Pricing, fees and OID | SOFR, spreads, floors, origination and exit fees, original issue discount and all-in yield |
| Covenants explained | Affirmative, negative and financial covenants; maintenance versus incurrence; cures |
| The borrowing base explained | Eligibility, advance rates, reserves, borrowing base certificates and cash dominion |
| Collateral, security and guarantees | Mortgages, UCC filings, control agreements, perfection and the main kinds of guarantee |
| Intercreditor agreements | How senior and junior lenders divide rights, payments and control |
| Amortization, call protection, PIK and interest reserves | How and when principal and interest are paid, and what happens if the loan is repaid early |
How to read a term sheet
Borrowers often focus on rate and proceeds. Experienced borrowers and their counsel also read for the following, because these are the terms that matter on a bad day:
- Conditions precedent. What must be true before the lender funds, and whether any condition is open-ended.
- Definitions. EBITDA, net operating income, eligible receivables and permitted debt are defined terms; the definition often matters more than the covenant level.
- Extension conditions. Whether an extension option is automatic on meeting stated tests or subject to the lender’s discretion.
- Cash management. When cash is swept, by whom and how it is released.
- Recourse. Who stands behind the loan beyond the collateral, and for what.
- Defaults and cure periods. What counts as a default, and how long the borrower has to fix it.
In our view, a good loan document is one both sides could explain to a stranger in plain English.
We draft to that standard. We would rather spend an extra hour making a provision clear than leave a question for later. A term sheet from Caldrion is backed by capital on hand, and we propose only terms we intend to honor. The same team that negotiates the documents services the loan, so the people who wrote a provision are the people who will apply it.
Where to go next
For how these terms apply to specific loans, see the loan types chapter and the case studies under our transactions, several of which set out terms in detail, such as Project Juniper and Project Orchard. For how we size the loan in the first place, see how we underwrite a loan. To discuss a request, use our contact form.
This entry is general information as of November 2026, not investment, legal or tax advice, and not an offer of securities.