Borrower
Uses capital and owes payment under the loan terms
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Private Credit
Look beyond the stated yield.
An attractive coupon is only one part of a lending investment. We examine repayment sources, collateral, priority, underwriting practices, and what happens when a borrower cannot pay.
HOW THE ECONOMICS FLOWPrivate Credit
01
BorrowerUses capital and owes payment under the loan terms
02
Investment vehicleMay originate, purchase, or hold the loan
03
Collateral & priorityMay support recovery, subject to value and enforceability
04
Investor returnCash interest, PIK income, fees, and principal repayment
START WITH THE STRUCTURE
What this kind of investment usually means.
Private credit can mean making a direct loan, buying a note, or investing in a fund that originates or acquires loans. Those structures create different rights, repayment sources, collateral claims, liquidity terms, and layers of manager discretion.
Private credit may involve a direct loan or an interest in a fund that originates or acquires loans. Understanding whether you own a loan, a note issued by an intermediary, or a fund interest is the first step in understanding your exposure.
HOW THE ECONOMICS WORK
Follow the path from the underlying activity to investor cash flow.
This simplified sequence is a reading aid. The offering documents determine the actual legal and economic relationships.
Investment vehicle
May originate, purchase, or hold the loan
Collateral & priority
May support recovery, subject to value and enforceability
Investor return
Cash interest, PIK income, fees, and principal repayment
TERMS WORTH UNDERSTANDING
Four concepts that can materially change how the opportunity reads.
Definitions are useful only when they are connected to the actual documents, economics, and risks.
Cash Interest
Interest paid currently in cash rather than added to the loan balance.
PIK Interest
Interest added to principal and recognized before cash is collected; it increases the amount owed.
Lien Priority
The order in which competing claims may be paid from collateral proceeds.
Recovery Rate
The share of exposure ultimately recovered after a default, workout, enforcement, and related costs.
WHERE DILIGENCE CONCENTRATES
The asset class changes the evidence that matters.
These are the areas an investor will usually need to connect before relying on the projected return.
Repayment & Borrower Quality
Cash-flow coverage, borrower concentration, underwriting criteria, loan performance, and reliance on refinancing or asset sales.
Collateral & Priority
Claimed security interests, lien position, valuation dates, loan-to-value calculations, guarantees, and enforcement considerations.
Fund Structure & Liquidity
Fund-level leverage, redemption terms, gates, cash reserves, duration mismatch, and how non-performing loans are valued.
Yield Quality & Incentives
Cash interest versus payment-in-kind interest, origination and servicing fees, defaults, recoveries, and affiliated transactions.
WHAT COULD GO WRONG?
Stress the plan before accepting the base case.
- The borrower cannot service or refinance the debt
- Collateral value is stale, uncertain, or insufficient
- PIK income makes reported yield look stronger than cash collections
- Fund redemptions and the duration of the loan book do not match
QUESTIONS FOR THE SPONSOR
01Is income received in cash or added to the loan balance?
02What percentage of the portfolio is extended, modified, or non-performing?
03Who holds the collateral claim, and what priority does that claim have?
04Can investor redemptions be suspended while loans remain outstanding?
DOCUMENTS TO REQUEST
The supporting file should match the investment being offered.
In addition to the core offering documents, useful records include loan tapes, underwriting policies, sample loan and security agreements, portfolio performance reports, valuation policies, and audited statements where available.
The PPM, Subscription Agreement, Operating Agreement, and sponsor marketing materials remain the usual starting set.
Read across the documents
Fees may appear in one agreement, distribution priorities in another, and the assumptions behind the return in a separate model. Compare the sources instead of reading each in isolation.
RESEARCH ON AN ACTUAL OFFERING
DealIQ™ applies this framework to the opportunity in front of you.
Investorly examines the offering, sponsor, Four P’s, source support, material inconsistencies, and open questions, then delivers the work in one written report.
$1,500one opportunity
within three business days after complete documents
Start Your Researchwithin three business days after complete documents
Research Scope
Private borrower records and collateral documentation may be unavailable. A stated lien position or collateral value is not a guarantee of recoverability. Research does not replace a legal enforceability opinion or a collateral appraisal.
Does a secured loan mean my capital is protected?
Security may provide a claim against collateral, but value, priority, enforcement costs, and competing claims affect recovery. The report examines those considerations without assuring repayment.
What if a document is missing?
Investorly identifies the gap and confirms whether the work can proceed within a clearly defined scope. Unavailable information is not treated as verified.