Benefits of Credit Facilities for Private Equity Funds

With over two decades of experience in the marketing and financial sector, attorney Zac Barnett provides a wealth of knowledge to financial players in multiple focus areas. Zac Barnett, a lawyer based in Hinsdale, Illinois, is experienced in managing credit facilities and private equity funds.

A credit facility is a loan provided by a financial institution to a private equity fund. Credit facilities often supply the capital required to make investments and help fund operations. Private equity funds often borrow money from banks or other financial organizations through credit facilities. Subscription credit facilities provide low-cost access to various currencies as well as letters of credit.

One of the key benefits of credit facilities is that they can be used to finance the acquisition of a portfolio firm without selling off other investments to raise the required cash. In addition, since they can be used as balance sheet builders, they allow fund sponsors to develop the requisite track record of investment, providing investors with a clear overview of the investment portfolio.

Additionally, subscription facilities assist funds in avoiding the need for making frequent, small-amount capital calls for working capital and related costs, possibly including management fee payments. As a result, funds can move rapidly on time-sensitive investments by avoiding the lead time needed to call capital from investors.