Underwriting is the work of deciding whether a loan should be made, how large it should be and how it should be built. Every lender has a version of it. Ours starts from one question that Caldrion, as an owner and operator of real assets and businesses, asks by habit: if we had to take this collateral back, what would it be worth, how long would that take and what would it cost?
This chapter explains how we answer that question and the questions around it. It is written for borrowers, sponsors and debt brokers who want to understand what a lender is testing when it asks for a rent roll, a receivables aging or a portfolio valuation, and why the answers shape the size and structure of a term sheet.
The four questions behind every loan
We organize underwriting around four questions. Each has its own entry in this chapter.
| Question | What we test | Entry |
|---|---|---|
| How much cushion sits beneath the loan? | Loan-to-value, loan-to-cost, advance rates, debt multiples | Leverage |
| Can the borrower carry the loan while the plan plays out? | Debt service coverage, debt yield, interest coverage, liquidity | Coverage and liquidity |
| What actually repays us? | Cash flow, the collateral, or both | Cash flow versus asset-based underwriting |
| Is the value real? | Appraisals, field exams, third-party reports, background checks | Collateral valuation and diligence |
A loan that answers all four well is usually straightforward to structure. A loan that answers three well and one poorly is where structure earns its keep: an interest reserve can solve a thin coverage problem during lease-up, a borrowing base can manage collateral that changes every week, and a lower advance can compensate for an exit that will take longer than the sponsor hopes.
Our published boundaries
Underwriting happens inside the criteria we publish on our criteria page. They are not a commitment to lend, but they define where we spend our time:
- Loan size of $5M–$50M, held on our balance sheet.
- First-lien, senior secured. We consider mezzanine only selectively, with strong control rights.
- Up to 75% loan-to-cost and up to 65% loan-to-value.
- Terms of 12–36 months, with extension options.
- Collateral of real and financial assets: commercial real estate, industrial equipment, corporate receivables, fund NAVs and other financial assets, in the United States.
Those leverage limits are ceilings, not targets. Many loans are sized well below them because coverage, liquidity of the exit or the quality of the collateral argues for less. We would rather lend less, sooner and with certainty than stretch for a larger loan.
How the pieces fit together
Start with the collateral
We begin with what stands behind the loan, because that is what protects principal if every projection is wrong. For real estate, that means as-is value, the cost to complete any business plan and the value once the plan is done. For an operating company, it means the liquidation value of receivables, inventory and equipment. For a portfolio of private investments, it means the portfolio under stress, not only at its latest mark. The entries on leverage and diligence cover how we arrive at those numbers.
Then the path to repayment
Short-term senior loans are usually repaid by a refinance, a sale, collections on a pool of assets or the cash flow of the business. We want to know which, why the borrower believes it, and what happens if it takes longer or produces less. A loan that can be repaid only if one specific event occurs is more fragile than we like. Coverage and liquidity explains how we test the exit.
Then the borrower
The sponsor or owner matters because plans change. We look at the equity at risk, the experience to execute, the reporting the borrower can produce and the candor of the first conversations. Background checks on principals are standard.
Then the structure
Only once we understand collateral, repayment and borrower do we write the structure: advance rates, covenants, reserves, guarantees and cash controls. Chapter three, terms and documentation, covers those tools in detail, including covenants and the borrowing base.
How underwriting differs by focus area
| Focus area | Primary repayment source | What we underwrite hardest |
|---|---|---|
| Real estate bridge and construction | Refinance or sale | Basis, budget, lease-up, exit liquidity |
| Asset-based lending | Collections and cash flow | Receivable quality, inventory saleability, cash control |
| NAV lending | Portfolio realizations | Diversification, valuation, stress case |
| Lender finance | Collections on the pool | Originator discipline, eligibility, performance data |
| Royalty and contract monetization | Contractual payments | Counterparty quality, legal rights, verified history |
Our case studies show the same method applied to different collateral: a multifamily lease-up bridge, an ABL growth facility and a NAV loan to a buyout fund among them. Twelve loans: the common thread draws out what they share.
Who decides
Every loan is decided by Caldrion’s 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 people who underwrite a loan are the people who service it, so the assumptions in the credit memo are the ones we live with afterward.
What helps us underwrite quickly
- A clear statement of the collateral and what it is worth today, with support.
- Sources and uses that reconcile to the dollar.
- A plan with dates, a budget and a named person responsible.
- An honest account of what could go wrong. Complexity does not disqualify a request; surprises slow everything down.
If you are ready to send a request, how to request a loan lists what to include, and you can reach us through the contact form.
This entry is general information as of November 2026, not investment, legal or tax advice, and not an offer of securities.