Subscription Line
Private Credit glossary · Fund Structures, Returns & Economics
Definition
Revolving credit facility extended to a fund and secured by uncalled LP commitments, with 1–2 year tenor and pricing of SOFR + 150–200 bps. By financing investments before drawing capital from LPs, the sub-line shortens the J-curve and mechanically inflates IRR (returns are computed on the smaller capital base for a longer period). Many institutional LPs now require GPs to report both with-sub-line and without-sub-line IRRs to neutralize this distortion.
Subscription Line in plain English
An investment fund collects money from big backers called LPs (limited partners), but it doesn't grab all their cash upfront — it 'calls' for it in chunks as needed. A subscription line is a short-term loan (usually 1–2 years, priced around a benchmark rate plus 1.5–2%) that the fund uses to pay for deals immediately, backed by the LPs' promises to send money later. Because it delays actually collecting cash, it flatters the fund's headline return rate (IRR): returns are a percentage, and the clock runs longer on a smaller pile of invested cash, so the percentage looks juicier. It's a bit like buying now on a credit card and paying friends back later so your own bank balance looks great in the meantime — which is why savvy LPs now demand to see returns both with and without this trick.
Learn these first
Related Private Credit terms
Private Credit practice questions · Private Credit flashcards · Private Credit study guide