Private credit is lending that happens outside the public bond market and outside the traditional bank balance sheet. A borrower negotiates a loan directly with a lender, the lender holds the loan rather than selling it into a market, and the terms are written for the specific borrower, collateral and plan. It is an old idea—merchants, landlords and family lenders made private loans long before there were bond markets—that has become a large and permanent part of modern finance.
This chapter covers the foundations. The rest of the knowledge base builds on them.
What this chapter covers
- What direct lending is, and who does it: the mechanics of a negotiated loan, how the market is structured among banks, business development companies, private credit funds, insurers and family offices, and why borrowers choose a direct lender.
- Lending from permanent capital: what it means for a lender to have no fund life, no investment period and no outside investors, and how that changes the experience of a borrower.
- The capital structure and why seniority matters: first lien, second lien, unitranche, mezzanine and preferred equity, what each position is paid for, and why we focus where we do.
Why private credit grew
For most of the twentieth century, US companies and real estate owners who could not access the bond market borrowed from banks. That began to change after the 2008 financial crisis. Higher bank capital requirements, supervisory guidance on leveraged lending and stricter rules for construction and transitional real estate made many loans more expensive for banks to hold. Regional bank stress in 2023 accelerated the trend in commercial real estate.
The demand for those loans did not disappear. It moved to non-bank lenders who could hold them: business development companies, private credit funds, insurance companies, pension plans and family offices. Industry estimates of the size of the private credit market vary with the definition used, but they are commonly measured in the trillions of dollars globally, and the market has grown substantially over the past fifteen years.
Private credit is not one thing. It includes cash-flow loans to sponsor-backed companies, asset-based loans against receivables and inventory, real estate bridge and construction loans, loans against portfolios of private investments, financing for other lenders and loans secured by royalties and contracts. What unites them is the direct relationship between borrower and lender, and the lender’s willingness to hold the loan.
How a senior secured lender thinks
Every loan answers two questions: how will the borrower repay, and what happens if it does not? Most lending analysis focuses on the first. Senior secured lending gives equal weight to the second.
A first-lien, senior secured lender has the first claim on specific collateral and ranks ahead of every other creditor and every owner in that collateral. That position does not make a bad loan good, but it changes the arithmetic of loss. If a plan fails, the lender’s recovery depends on the value of the collateral and the size of the cushion of equity and junior capital beneath the loan, not only on the borrower’s goodwill.
That is why our approach can be summarized in four words: capital first, yield second. We focus on the top of the capital structure: first-lien, senior secured positions. We consider mezzanine only selectively, with strong control rights. Our thesis is set out at greater length in Senior, secured and patient.
The four tools of credit protection
Throughout this knowledge base, four tools come up again and again. They are what stands between a lender and a loss.
| Tool | What it does | Where to read more |
|---|---|---|
| Seniority | Puts the lender first in line for repayment and for the collateral | Capital structure, intercreditor agreements |
| Collateral | Gives the lender an asset to look to if the plan fails | Collateral and guarantees, valuation and diligence |
| Structure | Limits leverage, controls cash and sets early warnings | Covenants, borrowing base, leverage |
| Judgment | Decides whether the plan, the people and the price make sense | Underwriting |
How Caldrion fits
Caldrion is a single family office in New York. It invests only its own capital and has no outside investors. Private credit is the income engine of Caldrion’s portfolio: the part meant to produce steady, contractual current income while protecting principal.
Our published criteria are summarized below and set out in full on our criteria page.
| Criterion | Published range |
|---|---|
| Loan size | $5M–$50M, held on our balance sheet |
| Position | First-lien, senior secured; mezzanine only selectively, with strong control rights |
| Geography | United States; major metros and business-friendly states |
| Collateral | Real and financial assets: commercial real estate, industrial equipment, corporate receivables, fund NAVs and other financial assets |
| Leverage | Up to 75% loan-to-cost; up to 65% loan-to-value |
| Term | 12–36 months, with extension options |
| Pricing | SOFR + 600–900 bps, or fixed-rate equivalent |
| Origination fee | 1–2% |
| Loan types | Bridge, construction, ABL and NAV; also lender finance and royalty monetization |
These ranges guide where we spend our time. They are not a commitment to lend; every loan is decided by our investment committee on the merits of the collateral, the borrower and the structure.
How the knowledge base is organized
The knowledge base is written for borrowers, sponsors, debt brokers, advisors and anyone who wants to understand how senior secured lending works in practice. It is organized in eight chapters:
- Private credit fundamentals (this chapter).
- Loan types and focus areas: bridge and construction, asset-based, NAV, lender finance, royalty monetization, term loans, unitranche and special situations.
- Terms and documentation: pricing, covenants, borrowing bases, collateral, guarantees, intercreditor agreements, amortization, call protection and PIK.
- Underwriting: leverage, coverage, liquidity, cash-flow versus asset-based analysis and diligence.
- Working with Caldrion: how to bring us a request and what happens from term sheet to funding.
- Workouts and enforcement: what happens when a plan goes off course.
- Glossary: the terms used throughout, defined in plain English.
- Frequently asked questions, beginning with working with us.
If you already have a loan request in mind, start with how to request a loan or go straight to the contact form.
This entry is general information as of November 2026, not investment, legal or tax advice, and not an offer of securities.