The Capital Landscape

Before you pitch a single capital provider, you need a mental map of who actually holds the money and what each type of holder is trying to accomplish. Not all capital is created equal. A family office writing small cheques operates differently from an insurer matching long-dated liabilities, and both differ from a bank lending against a structured vehicle with equity beneath it. A mismatch between what you need and who you are asking is one reason a first facility process can stall.

Who is on the other side of the table

The term "investor" collapses several distinct roles that behave differently once you are in documentation.

• Managers are the firms that raise and run capital. When a private credit manager tells you they have money under management, that is the manager-level figure. It does not tell you which vehicle would fund your facility, what that vehicle's remaining capacity is, or when it can deploy. A single manager can run several vehicle types and formats, so the name on the letterhead is not the same thing as the pool of money that will fund you.

• Funds and vehicles are where the capital actually sits. A single manager may run a flagship drawdown fund, one or more separately managed accounts, a rated-note feeder built for insurance investors, and an evergreen vehicle with different liquidity terms. These carry different mandates, cost of capital, concentration rules and investment periods. When a manager says yes, ask which vehicle is investing and how much of its investment period remains. A vehicle late in its deployment window is a different counterparty from one that just closed.

• Banks may provide secured lending to originators and may also finance funds. Both facts matter to you. If the credit fund quoting you is itself levered, that leverage can shape what the fund is able to accept: where its own facility excludes certain collateral, the same exclusion can flow through to yours. Ask whether the vehicle has back leverage and whether its terms constrain what it can hold, and ask where any facility you are offered sits in the capital structure rather than assuming seniority.

• Insurers typically hold long-dated liabilities and often care about the form in which an asset arrives, not only its economics. Rated note structures exist partly to serve that need. Insurance capital can reach you directly, through a manager's vehicle, or through a rated feeder, and each route carries different documentation and timing.

• Family offices are a distinct investor type rather than a single behaviour. They differ in how they are staffed, what they will underwrite and how quickly they decide. Some maintain dedicated structured credit capability; others do not. Ask directly who does the credit work, who signs off, and how much structuring the counterparty expects to do versus expects you to fund through counsel. The answer to that question, not the label, tells you what the process will cost you.

• Allocator is a role, not a category of firm. A pension, an insurer, a family office or an endowment may all allocate capital to a manager rather than lend to you directly. When you are talking to an allocator, your facility is one step removed from the decision maker, which changes both the path to yes and the timeline. Establish early whether the person opposite you is deploying capital into your structure or selecting a manager who might.

• Originators fund each other too. Forward flow, participations and whole-loan sales between platforms are real funding routes. A buyer who already originates your asset type may need less education on the collateral, which is worth testing early, though it does not follow that this route is faster or cheaper in any given case.

Capacity, stock and flow are three different numbers

Confusing them will make your ask look either naive or inflated.

Origination volume is a flow: what you write per month or per year. Outstanding receivables is a stock: what sits on your books at a point in time. Facility capacity sizes against the stock you intend to hold, not the flow you intend to write.

Work through a fictional example in US dollars, with figures chosen for teaching rather than drawn from any real facility. Suppose you originate $2m a month of bullet receivables that repay exactly six months after origination, and you hold everything you write. Once six cohorts are outstanding, the book sits at $12m even though you are writing $24m a year. If every receivable is eligible and the advance rate is 80%, that book supports $9.6m of debt. Asking for a $24m facility because you originate $24m a year would be asking for 2.5 times what the book can draw. If your contract carries an unused line fee, you would also pay that fee on the undrawn gap; whether it applies depends on the facility terms.

Real books do not behave this cleanly. Amortising assets, prepayments, ineligible balances and seasonal origination all move the outstanding figure around, which is exactly why the stock number has to be modelled rather than inferred from annual volume.

The relationship changes if you sell what you originate. In a second fictional illustration, a platform writing $2m a month and selling forward within thirty days needs only enough capacity to warehouse roughly a month of production plus a buffer, rather than a full year of volume. Same origination number, different facility.

Before any capital conversation, be able to state four figures without hesitation: monthly origination volume, current outstanding receivables, expected average life, and the peak eligible balance you expect to need funded over the next twelve months. That peak eligible borrowing need, plus a buffer, is what sizes your commitment — not peak gross stock on its own, since ineligible balances and advance rates sit between the two. The other figures explain how you get there.

Capital readiness as a set of qualitative stages

Readiness is not a revenue threshold you cross. It is a set of capabilities capital providers test, weighted differently by each of them. Rather than thinking in dollar bands, think in terms of what you can currently evidence.

• Founder-funded stage. You are funding originations with your own cash and whatever friends and family have contributed. That money may be structured as equity or as debt, and the structure matters: founder and friends-and-family capital documented as a loan is a liability with its own terms, not permanent capital, and a prospective lender will want to know which it is and whether it is subordinated. You may have limited performance history and no formal servicing infrastructure. At this stage, expect that counterparties will weigh you and your track record heavily alongside the asset itself. That is a legitimate place to start, and pretending otherwise wastes everyone's time.

• First institutional conversation stage. You have a loan tape that reconciles to your general ledger, a documented credit policy, static pool or vintage data covering enough time to show how cohorts season, and someone accountable for servicing. This is the point at which specialty finance funds, smaller credit vehicles and some family offices become plausible counterparties, though whether any given one engages depends on its mandate and pipeline. Structures at this stage tend to be bilateral, documentation is negotiated rather than templated, and the capital provider will spend real time on your operations, because operational risk is a large part of what they are taking.

• Repeat-facility stage. You have run a facility and built a demonstrable track record of how your assets performed against your own projections, and you can produce a borrowing base certificate that ties out cleanly. Reporting cycles build that record; a single clean month does not create it, and providers will look for consistency over time. Once you have it, you have more options to explore: a second provider, a larger commitment, a conversation about advance rates, or a term takeout. Whether those conversations produce better terms depends on your performance data, market conditions and who you are talking to.

Smaller single-asset originators deserve their own note. If you originate one narrowly defined asset type at modest volume, generalist capital may pass because the diligence cost does not scale for them. It is worth testing whether a fund or family office with specific expertise in that asset will look, on the theory that a counterparty who already understands the collateral has less to learn. Treat that as a hypothesis to test in outreach rather than a reliable outcome. Being small is a constraint on who will look, not a bar to getting financed.

The progression matters more than the speed. Each stage builds the evidence base the next one requires, and arriving at an institutional process without a reconciled tape or a servicing answer tends to end the conversation rather than delay it.

What actually drives the decision

Compare pricing alongside the terms that determine how much of your book can be funded. Eligibility criteria decide how much of what you originate can be funded at all. Advance rates decide how much equity you tie up per dollar of assets. Concentration limits decide whether your growth plan is fundable or whether you bump into a cap partway through the year. Reserves, cure rights and the definition of an eligible receivable can all affect your cash position materially. Which of these dominates depends on your book and the facility in front of you, so model them rather than ranking them in advance.

Ask three questions of any provider before you get deep into pricing. What share of my current book would be eligible under your criteria? What happens if eligibility deteriorates while my debt is outstanding? And who inside your organisation approves an amendment, and how long does that take?

That last question is underrated. Amendments happen often enough that the process is worth understanding upfront, whether the trigger is a product change, a concentration bucket filling up, or a definition that turned out tighter than either side intended. A provider with a slow or opaque amendment process can be expensive in ways that never appear in a term sheet.

The economics become concrete quickly once you run numbers. The warehouse worked example takes a simplified, fictional facility from opening balance sheet through first-year costs, surplus and downside cases, and shows the effects of fees, credit losses and lower utilisation, with a separate eligibility test. For the mechanics of how a commitment turns into cash, facility funding covers draws, conditions and the difference between operating-company, special purpose vehicle (SPV) and fund-level cash. In this example, an SPV is a separate legal entity formed to hold the financed receivables. Its separation from the operating company depends on the documents, law and how it operates.

Structures described here reflect a common US pattern of an originator, an SPV and a secured capital provider. Whether an SPV is treated as separate from the originator in an insolvency depends on how it is documented, how it is operated and the governing law. Legal form, insolvency treatment and account control vary by jurisdiction and by contract, and those are questions for your counsel rather than assumptions to carry into a term sheet.

Sequencing your conversations

Map providers to your actual stage before you start outreach, then run conversations in a deliberate order rather than broadcasting a deck. Start with two or three counterparties whose mandate plausibly fits, and use those conversations to find where your data or operations are weakest. You will hear the same questions repeatedly. Fix what you cannot answer before you approach the providers you most want.

Get clear on roles early. Is this a fund deploying committed capital, a bank lending against a structured vehicle, or an allocator that needs to go back to a committee? Each has a different path to yes and a different timeline. Ask directly rather than inferring from the firm's name or size. Knowing which one you are talking to is most of the work.