Direct lending and credit investing
Private credit interviews are built around downside protection. The investor must determine whether the borrower can service debt through a range of operating outcomes and what value remains if the base case fails.
Candidates coming from banking often know transaction mechanics but need to shift the discussion from execution to principal risk. The strongest answers prioritize cash generation, documentation, collateral, sponsor behavior, and recovery rather than headline growth.
Understand revenue concentration, cyclicality, margin structure, working capital, maintenance capital expenditure, and the conversion of EBITDA into cash available for debt service.
Know total, senior, and net leverage; fixed-charge and interest coverage; debt capacity; and why EBITDA adjustments require skepticism.
Be able to discuss maintenance and incurrence covenants, restricted payments, baskets, collateral, guarantees, call protection, portability, and reporting requirements.
Build a conservative operating case, identify liquidity needs, estimate enterprise or asset value in distress, and map proceeds through the capital structure.
Core questions
Question 1
Look for recurring and defensible cash flow, manageable capital intensity, strong liquidity, conservative leverage, credible ownership, and a business that can be valued in a downside. The structure should also provide reporting, covenants, collateral, and pricing appropriate for the risk.
Question 2
Start with normalized cash earnings rather than management EBITDA. Deduct cash taxes, working-capital needs, maintenance capital expenditure, and other fixed charges. Compare the resulting debt-service capacity with interest, amortization, maturities, and downside liquidity under several operating cases.
Question 3
With fewer maintenance tests, monitoring, collateral quality, liquidity, documentation baskets, and early-warning indicators become more important. The lender may have less ability to intervene before value deteriorates, so underwriting must assume a longer path to control.
Question 4
Enterprise value is commonly assessed under a going-concern base case. Recovery value asks what the business or assets could realize in a stressed restructuring or sale, after costs and according to claim priority. The method and multiple should reflect the distressed scenario rather than the original underwriting case.
Question 5
A credible answer should focus on contractual return, capital-structure analysis, downside protection, documentation, and the repeated evaluation of cash-flow durability. Avoid presenting credit as an easier version of private equity.
Interviewers test transaction exposure, credit judgment, and whether your role involved real underwriting rather than process administration.
Expect leverage, coverage, cash conversion, documentation, capital structure, and downside questions.
You may receive a company, model, or lender presentation and be asked to recommend structure, pricing, covenants, and whether to invest.
Final discussions test whether you communicate risk clearly and can decline a weak opportunity without losing the commercial context.