Negotiating a subscription credit facility on behalf of a private fund can be a daunting task for attorneys practicing outside the world of fund finance. While members of a sponsor’s business team may negotiate the economic terms of the facility, the two main agreements that govern a subscription credit facility – the credit agreement and security agreement – are replete with representations, warranties, covenants and event of default provisions. These provisions must be carefully scrutinized to confirm their accuracy; ensure that the fund’s existing business model is adequately designed to fulfill future obligations under the agreements; and evaluate the likelihood that the fund will avoid any potential event of default scenario. This second article of our three-part series discusses the primary advantages to funds, sponsors and investors of using these facilities and explores the legal documents that govern them. The first article provided background on the types of funds that frequently use these facilities, recent trends that have emerged regarding this form of financing, basic mechanics of these facilities’ structures and the types of lenders that routinely offer these products. The third article will evaluate concerns raised by members of the private equity industry regarding these facilities, including whether they should be used for longer-term financing and how they impact a fund’s internal rate of return. See “Types, Terms and Negotiation Points of Short- and Long-Term Financing Available to Hedge Fund Managers” (Mar. 16, 2017).