What is Subscription Credit Facility?
A subscription credit facility (or "sub line") is a loan to a fund secured by its LPs' uncalled capital commitments. GPs use it to close deals quickly and batch capital calls — which also flatters reported IRR by delaying when LP capital is actually drawn.
A subscription credit facility is a revolving loan provided by a bank to a fund, secured not by fund assets but by the right to call the LPs' unfunded commitments. The GP borrows to fund investments immediately, then repays the line later with a consolidated capital call. This smooths fund operations: deals close on the lender's timeline, and LPs face fewer, more predictable capital calls.
The controversial side effect is IRR enhancement. Because the IRR clock starts when LP capital is called — not when the deal closes — delaying calls by 6-12 months mechanically raises reported IRR without creating any economic value. ILPA guidance now calls for GPs to disclose both levered and unlevered IRR, and sophisticated LPs routinely ask how sub-line usage affects a fund's track record when comparing managers.
Also known as: subscription line, sub line, capital call facility