Private lending capital glossary

63 terms. Each definition links to a longer explanation and to the guides where the term matters.

Advance rate

The advance rate is the percentage of a pledged loan’s balance that a warehouse line or credit facility lends against. The lender funds the rest, the haircut, from its own capital.

After-repair value (ARV)

After-repair value (ARV) is the estimated market value of a property once the planned renovation or construction is complete. Fix-and-flip and construction lenders use it to size loans and to set the loan-to-ARV limit.

Allonge

An allonge is a separate sheet of paper attached to a promissory note that carries an endorsement transferring the note, used when there is no room on the note itself. Under the UCC, a paper affixed to the instrument is part of it.

Assignment of mortgage

An assignment of mortgage (or of deed of trust) is the recorded document that transfers the lender’s interest in the security instrument to a buyer, so public records show who holds the lien.

Bailee letter

A bailee letter is the document under which a party holding original loan documents, such as a buyer or custodian, agrees to hold them for the warehouse lender’s benefit until the lender is paid.

Bid-ask spread (notes)

In a note sale, the bid is the price a buyer offers, the ask is the price the seller wants, and the bid-ask spread is the gap between them. A sale happens when the two meet.

Borrowing base

A borrowing base is the pool of eligible collateral, valued at agreed advance rates, that caps how much a borrower can draw on a credit facility at any moment. It moves as collateral is added, ages or pays off.

Business-purpose loan

A business-purpose loan is credit extended primarily for a business, commercial or agricultural purpose, such as an investor’s fix-and-flip or rental loan. Federal consumer rules such as TILA and RESPA generally exempt it.

Capital partner

A capital partner is an investor, such as a fund, family office or institution, that provides the money behind a lender’s loans. With Lender Capital, one capital partner funds each whole loan at closing or buys a whole loan the lender already funded.

Capital provider

A capital provider is any source that supplies money for a private lender’s loans: a warehouse line, a loan buyer, a table funder or an investor. A capital partner is the kind that funds or buys whole loans through Lender Capital.

Co-lending

Co-lending is an arrangement in which two or more lenders fund portions of the same loan, either side by side as co-lenders or through a lead lender that sells participations to the others.

Collateral file

A collateral file is the set of original documents that prove a loan and its lien: the original note with endorsements or allonges, the recorded mortgage or deed of trust, assignments, and the title policy. It moves to the buyer or its custodian in a loan sale.

Concentration limit

A concentration limit caps how much of a credit facility’s collateral can come from one source of risk, such as one borrower, one property type or one market. Collateral above the cap is excluded from the borrowing base.

Correspondent lending

Correspondent lending is a channel in which a lender originates, underwrites and closes loans in its own name, then sells them to a larger investor or aggregator under a standing purchase agreement.

Debt service coverage ratio (DSCR)

The debt service coverage ratio (DSCR) is a property’s income divided by its loan payments. A DSCR of 1.25 means income covers the payment 1.25 times. DSCR rental loans are underwritten on it, not on personal income.

Delegated underwriting

Delegated underwriting is authority a loan buyer gives an approved seller to underwrite and approve loans against the buyer’s guidelines, without the buyer re-underwriting each file before it commits.

Direct capital placement

Direct capital placement matches a lender’s individual loan with a capital partner that funds the whole loan at closing, instead of the lender funding it from a credit line and selling it later.

Draw schedule

A draw schedule is the plan for releasing a construction or rehab loan’s budget in stages as work is completed. Each draw is paid after an inspection confirms the work, so loan funds track the value added to the property.

Dry funding

Dry funding is when a warehouse provider advances money on a loan only after it has closed and the original note and closing documents have been delivered and reviewed.

Dwell time

Dwell time is how long a loan stays pledged on a warehouse line before it is paid off, sold or removed. Lines usually cap it, and a loan that ages past the limit can lose its advance or have to come off the line.

Eligibility criteria

Eligibility criteria are the rules a loan must meet to count toward a credit facility’s borrowing base or to be bought by an investor, such as loan type, lien position, LTV, size, location and age.

First lien

A first lien is the senior claim on a property: the mortgage or deed of trust that is paid first from a sale or foreclosure, before any second or later liens. Most private lending capital is available only for first-lien loans.

Forward flow agreement

A forward flow agreement is a contract in which an investor agrees in advance to buy a lender’s future loans that meet set criteria, at agreed pricing, over a set period.

Haircut

A haircut is the part of a pledged loan that a warehouse line or credit facility does not finance. It equals the loan balance minus the advance, and the lender funds it with its own capital.

Interest reserve

An interest reserve is part of a loan set aside at closing to pay the loan’s own interest for a set period, usually while a property is renovated or built and earns no income. Payments come from the reserve, not the borrower.

Lead lender

The lead lender is the lender that originates and closes a loan, holds it in its name and manages it on behalf of participants or co-lenders who fund part of the balance. It usually services the loan and reports to the group.

Loan assignment

A loan assignment transfers a loan, the note and the mortgage or deed of trust that secures it, from one lender to another. The buyer becomes the owner of the loan and the borrower’s obligation runs to them.

Loan participation

A loan participation is an arrangement where a lead lender sells undivided shares of a loan to other investors (participants) while keeping the loan in its name and usually servicing it.

Loan tape

A loan tape is a spreadsheet with one row per loan and one column per data field, such as balance, rate, LTV, property and borrower experience, that a buyer or capital partner uses to screen and price loans.

Loan-to-cost (LTC)

Loan-to-cost (LTC) is the loan amount divided by the total project cost, usually the purchase price plus the renovation or construction budget. It shows how much of the project the borrower is funding with its own cash.

Loan-to-value (LTV)

Loan-to-value (LTV) is the loan amount divided by the property’s value, shown as a percentage. A $300,000 loan on a $500,000 property is 60% LTV. The lower the LTV, the more equity stands between the lender and a loss.

Margin call

A margin call is a warehouse or repo lender’s demand for cash or more collateral when the value of pledged loans, times the advance rate, falls below what the borrower owes on the line.

Mark-to-market

Mark-to-market is a facility provider’s right to revalue pledged loans at current market value. If values fall, the borrowing base shrinks and the lender may have to post cash or collateral.

Non-performing note

A non-performing note (or non-performing loan, NPL) is a loan in serious delinquency or default: the borrower has stopped paying, the loan is past maturity, or another default is uncured. Buyers price it on what they expect to recover, not on the note rate.

Non-usage fee

A non-usage fee (or unused line fee) is a charge on the part of a committed credit facility a borrower does not draw, compensating the provider for keeping that capacity available.

Note buyer

A note buyer is an investor or institution that buys existing real estate loans (the promissory note and the mortgage or deed of trust securing it) from the lender that made them, usually at a price set against the unpaid balance.

Note-on-note financing

Note-on-note financing is a loan to a lender secured by a note the lender owns. The lender keeps the original loan and its income, pledges the note as collateral, and stays liable for the financing even if its borrower defaults.

Origination points

Origination points are an upfront fee a lender charges the borrower at closing, stated as a percentage of the loan amount. One point equals 1% of the loan, so 2 points on $500,000 is $10,000.

Par, premium and discount

Loan sale prices are quoted as a percentage of the unpaid principal balance. Par is 100, a premium is above 100 (the buyer pays extra) and a discount is below 100 (the buyer pays less than the balance).

Participation agreement

A participation agreement is the contract under which a lead lender sells undivided shares of a loan to participants. It sets each party’s share of payments, who services the loan and who decides on extensions and defaults.

Performing note

A performing note is a loan whose borrower is making payments as agreed: current, or only briefly late, with no default. It is priced mainly on its rate, term and risk rather than on what a workout might recover.

Personal guarantee

A personal guarantee is an owner’s promise to repay a company’s debt from personal assets if the company cannot. Warehouse and credit facility providers commonly require one from a lending company’s major owners.

Placement fee

A placement fee is what a capital placement platform charges for matching a loan with a capital partner that funds it. With Lender Capital it is paid at closing from the lender’s points, only when the loan funds.

Prepayment penalty

A prepayment penalty is a fee a borrower pays for repaying all or part of a loan early. On business-purpose loans it is set by contract, often as a step-down percentage or a minimum interest period, subject to state law.

Re-performing loan

A re-performing loan (RPL) is a loan that was seriously delinquent or in default and is now being paid again, often after a modification, forbearance or repayment plan.

Recourse loan

A recourse loan lets the lender collect any shortfall from the borrower (and any guarantors) beyond the collateral. In a non-recourse loan, the lender’s recovery is limited to the collateral.

Remittance report

A remittance report is the periodic statement a servicer sends a loan’s owner showing what borrowers paid, what was passed on, fees deducted, balances, draws and any delinquencies for the period.

Repurchase facility

A repurchase (repo) facility finances loans by having the lender sell them to the provider with an agreement to buy them back later at a higher price. Many warehouse lines are documented this way.

RTL securitization

RTL securitization pools residential transition loans (short-term bridge, fix-and-flip and similar loans on residential property) into a trust that issues bonds to investors, who are repaid from the loans’ payments and payoffs.

Servicing released

Servicing released means a loan is sold together with its servicing, so the buyer, or a servicer the buyer chooses, takes over collecting payments and managing the loan from the borrower.

Servicing retained

Servicing retained means the lender sells or assigns a loan but keeps the right and the job of servicing it: collecting payments, managing draws and escrow, and remitting funds to the new owner.

Sub-performing note

A sub-performing note is a loan whose borrower is paying, but not as agreed: late, partial or irregular payments, without being in full default. Buyers price it between a performing and a non-performing note.

Sublimit

A sublimit is a cap inside a credit facility on how much of the total commitment can be used for one category of collateral, such as a loan type, a state or loans past a certain age.

Syndication

Loan syndication is when several lenders or investors each fund a share of one loan. A lead lender usually arranges the deal, closes the loan, documents each share and often services the loan for the group.

Table funding

Table funding is a closing where a loan is funded by another party’s money at the closing table and assigned to that party at closing. The originating lender closes the loan in its name without using its own capital.

Takeout commitment

A takeout commitment is an investor’s agreement to buy a loan, or a defined volume of loans, from the originator on stated terms. Warehouse providers rely on it as the exit that repays their advance.

Tangible net worth covenant

A tangible net worth covenant requires a borrower under a credit facility to keep its net worth, excluding intangible assets such as goodwill, above a set minimum. Breaching it can let the provider cut or cancel the line.

Unpaid principal balance (UPB)

Unpaid principal balance (UPB) is the principal a borrower still owes on a loan, not counting accrued interest, fees or unfunded holdbacks. Loan sale prices are usually quoted as a percentage of UPB.

Warehouse line

A warehouse line is a revolving credit facility that lends a lender part of each loan it originates, secured by the loans themselves, and is repaid when each loan pays off or is sold.

Wet funding

Wet funding is when a warehouse provider advances money for a loan at or before closing, before it has received and reviewed the original note and closing documents.

White-label lending

White-label lending is when a lender originates loans under its own brand while another party provides the capital, and sometimes the underwriting guidelines or servicing, behind the scenes.

Whole loan sale

A whole loan sale is the sale of an entire loan, the note and the mortgage or deed of trust securing it, to a buyer who becomes the owner of the full balance and its future payments.

Yield spread

A yield spread is the difference between the note rate a lender charges the borrower and the rate paid to whoever funds or owns the loan. The lender keeps that difference as ongoing income.

Lender Capital is a business-to-business platform. This page is general information, not legal, tax or securities advice. Terms of warehouse lines and other funding sources vary by provider; confirm them with each provider and your counsel.