This glossary defines the terms that come up most often in private credit: in term sheets, credit agreements, diligence requests and workout conversations. Each definition is short; the link after it points to the entry that explains the concept in depth. Where a term has a market convention, we describe the convention, not a Caldrion rule. Our own published terms are on our criteria page.
A–B
Acceleration. The lender’s right, after an event of default, to declare the whole loan immediately due. See enforcement and remedies.
Advance rate. The percentage of an eligible asset’s value a lender will lend against, such as a share of eligible receivables. See the borrowing base.
Amortization. Scheduled repayment of principal during the life of a loan, as opposed to a single payment at maturity. See amortization, call protection and PIK.
Asset-based lending (ABL). Lending sized to the liquidation value of receivables, inventory and equipment rather than to earnings alone. See asset-based lending explained.
Bad-boy guaranty. A guaranty, also called a carve-out guaranty, that makes a principal personally liable if specified misconduct occurs, such as fraud or an unpermitted transfer. See collateral, security and guarantees.
Basis point (bp). One hundredth of one percent; 600 bps is 6.00%. See pricing, fees and OID.
Borrowing base. The formula that sets how much a borrower may draw under a revolving facility, based on eligible collateral and advance rates. See the borrowing base.
Bridge loan. Short-term financing that carries an asset or business to a defined next step, typically a sale or a refinance. See real estate bridge and construction loans.
C–D
Call protection. Terms that compensate a lender if a loan is repaid early, such as prepayment premiums or minimum interest. See amortization, call protection and PIK.
Cash dominion. The lender’s control over the borrower’s collection accounts, so receipts sweep to repay the loan. See the borrowing base.
Completion guaranty. A sponsor’s promise to finish a construction project and pay any cost overruns. See collateral, security and guarantees.
Covenant. A promise in the loan agreement to do, not do or maintain something. See covenants explained.
Cross-collateralization. Securing a loan with several assets, so each supports the whole debt. See NAV lending explained.
Cure right. A right, often of a junior lender or an equity owner, to fix a default before the senior lender enforces. See intercreditor agreements.
Debt service coverage ratio (DSCR). Cash flow available for debt service divided by required interest and principal payments. See coverage and liquidity.
Debt yield. Net operating income divided by the loan amount, a leverage measure that ignores interest rates and amortization. See coverage and liquidity.
Deed in lieu. A borrower’s voluntary transfer of property to the lender instead of a foreclosure. See enforcement and remedies.
Direct lending. Loans originated and held by a non-bank lender that negotiates directly with the borrower. See what direct lending is.
E–I
Eligibility criteria. The tests an asset must pass to count in a borrowing base, such as receivables under a set age. See the borrowing base.
Equity cure. An owner’s right to contribute new equity to fix a financial covenant breach. See covenants explained.
Event of default. A defined failure, such as nonpayment or a covenant breach, that gives the lender its remedies. See defaults, forbearance and restructuring.
Extension option. The borrower’s right to extend maturity if stated conditions are met, often for a fee. See amortization, call protection and PIK.
Field exam. An on-site review of a borrower’s receivables, inventory and reporting systems. See collateral valuation and diligence.
First lien. The senior security interest in collateral, paid first from its proceeds. See the capital structure.
Fixed charge coverage ratio (FCCR). Cash flow after capital spending and taxes divided by fixed charges such as debt service and leases. See coverage and liquidity.
Forbearance. A lender’s agreement not to enforce remedies for a period, usually in exchange for conditions. See defaults, forbearance and restructuring.
Future funding. Loan proceeds committed at closing but advanced later, for renovation, construction or leasing costs. See real estate bridge and construction loans.
Incurrence covenant. A test that applies only when the borrower takes an action, such as adding debt. See covenants explained.
Intercreditor agreement. The contract between lenders that sets priority, payment and enforcement rights. See intercreditor agreements.
Interest reserve. Loan proceeds set aside to pay interest while an asset is not yet producing enough income. See amortization, call protection and PIK.
L–N
Lender finance. Senior financing to a lender, secured by the loans it has made; also called loan-on-loan. See lender finance explained.
Lockbox. A bank account into which customers pay, controlled by or for the lender. See the borrowing base.
Loan-to-cost (LTC). Loan amount divided by total project cost. See leverage.
Loan-to-value (LTV). Loan amount divided by the appraised or assessed value of the collateral. See leverage.
Maintenance covenant. A financial test the borrower must meet at regular intervals, whether or not it takes any action. See covenants explained.
Mezzanine. Debt junior to the senior loan, often secured by a pledge of the borrower’s equity. See the capital structure.
NAV loan. A loan secured by the net asset value of a diversified portfolio of private investments. See NAV lending explained.
Net orderly liquidation value (NOLV). The estimated net proceeds of selling assets in an orderly process, after costs. See collateral valuation and diligence.
O–R
Original issue discount (OID). A loan funded below its face amount, so the lender earns the difference at repayment. See pricing, fees and OID.
Origination fee. A fee paid at closing for arranging and committing the loan. See pricing, fees and OID.
Payment-in-kind (PIK). Interest added to the loan balance instead of paid in cash. See amortization, call protection and PIK.
Perfection. The steps, such as a UCC filing or a recorded mortgage, that make a security interest effective against third parties. See collateral, security and guarantees.
Permanent capital. Capital with no fixed date by which it must be returned to investors. See lending from permanent capital.
Prepayment premium. A fee for repaying a loan before a stated date. See amortization, call protection and PIK.
Receivership. A court appointment of a neutral party to manage and preserve collateral during enforcement. See enforcement and remedies.
Recourse. The lender’s ability to look beyond the collateral to a borrower or guarantor for repayment. See collateral, security and guarantees.
Royalty monetization. Capital today against a stream of royalty payments, secured by the royalty rights. See royalty and contract monetization.
S–Z
Second lien. A security interest ranking behind the first lien in the same collateral. See intercreditor agreements.
Senior secured. Debt that ranks first in payment and holds a security interest in collateral. See the capital structure.
SOFR. The Secured Overnight Financing Rate, the common US floating base rate for loans. See pricing, fees and OID.
Sources and uses. A table showing where the money in a transaction comes from and where it goes. See how to request a loan.
Special situations. Lending in complex or stressed circumstances, such as turnarounds or rescue financing. See senior secured, unitranche and special situations.
Term sheet. A summary of proposed loan terms that precedes documentation. See loan terms and documentation.
UCC-1. The financing statement filed under the Uniform Commercial Code to perfect a lien on most personal property. See collateral, security and guarantees.
Unitranche. A single loan combining what would otherwise be senior and junior debt, at one blended price. See senior secured, unitranche and special situations.
Workout. The negotiated resolution of a loan in trouble, short of or alongside enforcement. See workouts and enforcement.
This entry is general information as of November 2026, not investment, legal or tax advice, and not an offer of securities.