All-In Yield
Private Credit glossary · Documentation, Covenants & Terms
Definition
Total expected yield combining (1) the floating-rate index (e.g., Term SOFR subject to any SOFR floor), (2) the contractual spread, (3) OID/upfront fees amortized over expected life using the yield-to-takeout convention y_t ≈ y_c + (Par-Price)/(n · Price), and (4) PIK income if any. For a typical middle-market unitranche at SOFR + 600 with a 1% floor, 99 OID, and a 3-year expected life, the all-in yield runs roughly 11%–12%.
All-In Yield in plain English
All-in yield is simply the TOTAL return a lender actually expects to earn on a loan once you stack up every source of income, not just the headline interest rate. The pieces are: a moving base rate (SOFR, which rises and falls with the economy, but never below an agreed "floor"), the fixed extra percentage the lender charges on top (the "spread"), any discount or fee collected upfront (if the lender pays 99 cents to lend a dollar, that extra penny is bonus yield spread over the loan's life), plus "PIK" interest that piles onto the balance instead of being paid in cash. Add it all up on a typical mid-sized loan and you land around 11%–12% — think of it as the price sticker versus what you truly pocket after all the add-ons.
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