We thought we'd give you a quick crash course on some of the terms, acronyms and lingo thrown around when it comes to lending and private credit. 

At Eldium, these aren’t buzzwords or theoretical concepts, they’re the terms we use every day when we say yes (or no) to a facility.

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LTV - Loan-to-Value

Quite simply, as the letters suggest. LTV measures the size of the loan against the value of the underlying collateral. It’s measured as a ratio or % out of 100%. 

Lower LTVs absorb volatility and protect capital; higher LTVs shrink your margin for error.

In private credit, LTV is the quiet truth-teller - it reveals how conservative (or adventurous) a lend really is.

How to use it in a sentence:  A $15m facility was provided against a diversified loan book valued at $20m, resulting in an LTV of 75%.

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Buffer

A buffer is the layer of protection designed to absorb stress before senior capital feels it.

It might come in the form of equity, first-loss capital, extra collateral, excess spread, or cash reserves.

In theory, everyone likes buffers. In practice, not everyone builds enough of them.

How to use in a sentence: The loan provided at 75% LTV has a capital buffer of 25%. That means the loan can survive a loss in the portfolio of at least 25% before suffering any impact. 

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Institutional Grade

Institutional grade refers to a credit facility designed with the structure, governance, and risk controls typically expected by large institutional investors.

In private credit, this doesn’t rely on public credit ratings. Instead, it reflects how a facility is underwritten, structured, documented, and monitored over its life.

Key characteristics include durable cash flows, conservative leverage, robust legal protections, disciplined covenant frameworks, and ongoing performance transparency.

Institutional grade isn’t about how a deal is labelled, it’s about whether it can withstand institutional scrutiny in stressed conditions.

How to use it in a sentence: The facility has been structured to institutional-grade standards, with conservative leverage and strong covenant protections.

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First Loss Capital

First loss capital is the funding tranche that absorbs losses before senior capital is impacted.
It sits beneath investors in the capital structure and exists to protect them.

In our case, this isn’t theoretical, our founders commit at least 10% of the Fund as first loss capital. We also structure each individual facility within the portfolio with first loss capital, which means our Fund has it at multiple levels. 

It’s the strongest possible signal of alignment, it’s basically us saying: “If things go bad, we’re the ones taking the first punch.”

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Covenants

Covenants are the contractual thresholds and tests set out in the legal documentation that allow action to be taken if a loan or facility stops performing as expected.

At Eldium, covenants are embedded in every facility to provide early warning signals and clear intervention rights.

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Concentration Limits / Concentration Risk

A risk-mitigation measure embedded in the legal documentation to ensure the underlying loan portfolio remains appropriately diversified, without excessive exposure to any single borrower, sector, or asset type.

Concentration limits exist to manage correlation risk, because diversification only works if positions don’t fail together.

How to use it in a sentence: The Fund applies strict concentration limits across borrowers and sectors.

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Private credit works best when everyone at the table speaks the same language and means the same thing when they use it.

These terms aren’t just definitions. They’re the mechanics that shape risk, alignment, and outcomes. And in private markets, understanding the mechanics is often the difference between confidence and blind faith.

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