Resources
Glossary of Private Credit Terms
Plain language definitions of the terms that appear in private credit documents. This glossary is expanded on an ongoing basis.
B
- Bridge Loan
- Short-term financing intended to be repaid from a defined future event, such as a sale, lease-up, or refinancing. Bridge loans typically carry higher rates and shorter maturities than permanent financing, which increases exposure to delay.
D
- Default Provision
- A contract term defining the events that constitute default. Provisions may cover monetary default, such as a missed payment, and non-monetary or technical default, such as a covenant breach or failure to deliver reporting.
- Direct Lending
- Loans originated and held by non-bank lenders and negotiated directly with the borrower, rather than syndicated or distributed through public markets.
E
- Equity Stripping
- A pattern in which a borrower's accumulated equity in an asset is transferred to a lender or affiliated party through fees, restructuring, or enforcement, rather than through an arm's length sale.
I
- Interest Reserve
- Loan proceeds held back by the lender to fund interest payments during a period when a project or business is not generating revenue. Interest generally accrues on reserved amounts even though the borrower never receives them for project use.
L
- Loan Modification
- A negotiated amendment to existing loan terms, often addressing maturity, payment schedule, interest rate, or collateral. Modifications may also introduce new fees, waivers, releases, or acknowledgments of default.
M
- Mezzanine Debt
- Financing that sits between senior secured debt and equity in the capital structure. It carries higher pricing than senior debt and may include equity participation or conversion features.
P
- Personal Guarantee
- An individual's contractual promise to satisfy the obligations of a borrowing entity, which can place personal assets at risk independently of the underlying project or business.
- Private Credit
- Credit extended by non-bank lenders, including private funds, business development companies, and specialty finance firms, typically through privately negotiated agreements that are not publicly disclosed.
U
- Usury
- The charging of interest above a legally permitted maximum. Usury limits vary by state, and their application to commercial transactions and to non-bank lenders differs across jurisdictions.
Definitions are general information, not legal or financial advice. Usage can vary by jurisdiction and by contract.