Updated 2025

The market for subscription-backed credit facilities, also known as “capital call” or “capital commitment” facilities (“Subscription Facilities”), continues to grow rapidly, expanding into a broader range of Funds,¹ with constantly evolving features and mechanics. As the Subscription Facility market continues to grow, the functionality of Subscription Facilities has also grown beyond its roots of bridging capital calls. Funds are now realizing a variety of benefits beyond bridging capital calls, several of which are briefly discussed below.

Bridging Capital Calls and Other Financings

Traditionally, the primary function of Subscription Facilities has been to bridge capital calls and other types of permanent financing, creating a number of benefits including the following.

First, Subscription Facilities offer Funds fast access to capital, allowing Funds to move quickly with respect to time-sensitive investments. In the governing documentation of typical Funds, investors must be given at least 10-15 business days’ notice prior to funding a capital call. In contrast, the terms of most Subscription Facilities permit Funds to receive borrowings with as little as one business day notice, avoiding the long lead time required in calling capital from investors. The faster access to capital afforded by a Subscription Facility may give Funds a competitive advantage over rivals, especially with respect to quickly developing opportunities. Additionally, by having a Subscription Facility available, Funds may be able to avoid making anticipatory capital calls for investments that are ultimately not consummated resulting in an administrative burden of returning the capital to the investors.

Second, Subscription Facilities provide a means for Funds to “smooth” capital calls made to investors in terms of size and frequency. Without a Subscription Facility in place, Funds may need to make frequent capital calls in small amounts in order to provide for working capital and similar expenses, including payment of management fees....