Glossary

An investor who meets a test in SEC Rule 501(a) of Regulation D. For individuals the tests include income over $200,000 (or $300,000 jointly with a spouse or spousal equivalent) in each of the last two years, with a reasonable expectation of the same this year; net worth over $1 million, excluding the primary residence; or a Series 7, 65 or 82 license in good standing. Entities have separate tests.

The share of a collateral value that a lender will lend. At a 60% advance rate on an orderly liquidation value of $500,000, the loan is at most $300,000; the rate moves with the quality of the customer contract and the age of the hardware.

The weighted average cost of the debt and equity that fund a specific pool of assets, such as GPUs held in a special purpose vehicle, weighted by loan-to-value. It equals (D/V) × cost of debt × (1 − tax rate) + (E/V) × cost of equity, and can differ from the owner’s corporate cost of capital.

The part of an asset’s cost that its owner or lender has not yet recovered. A prepayment reduces it from the first day: a $640,000 node with $252,288 prepaid has $387,712 at risk.

A loan term that sends excess cash to the lender, instead of to the borrower, when a trigger occurs, such as a late customer payment or a contract nearing its end.

Renting space, power and cooling for your own servers in a data center that someone else operates, usually priced per kilowatt per month.

The hourly price per GPU fixed in a reserved or multi-year contract, as opposed to the on-demand (spot) rate charged for capacity without a commitment. Lenders size loans on the contract rate, which is usually the lower of the two.

Cash available for debt service divided by the interest and principal due in the same period. A DSCR of 1.25x means the borrower generates 25% more cash than it needs to pay the loan.

Cash set aside, usually a few months of interest and principal, that a lender can draw on if the borrower’s cash flow falls short.

A term loan that the borrower draws in stages over an agreed period rather than all at closing, often to pay for equipment as it is delivered.

An investment adviser that is exempt from registration, for example because it advises only venture capital funds, or only private funds with less than $150 million of assets under management in the United States, but that must still file parts of Form ADV and follow the antifraud rules. The SEC and each state, including Washington, set their own conditions.

The price at which equipment would change hands between a willing buyer and a willing seller, both reasonably informed and neither under pressure to act.

A loan secured by a first-priority claim on the collateral: after a default, the first-lien lender is repaid from the collateral before any other creditor with a claim on it. In GPU financing the operator owns the servers and pledges them, often together with an assignment of the customer contract.

GPU Capital’s name for a structure in which the capital provider buys and owns the GPU servers and an operator runs them for an end customer. After data center costs, the customer’s prepayment and monthly fees go to the owner until it has recovered what it paid for the servers. Profits after that are shared with the operator.

The value of equipment in continued use, installed, connected and earning revenue, as opposed to its value if removed and sold.

One GPU used, or reserved, for one hour: the unit in which compute is priced. An 8-GPU server billed for a 730-hour month at $3.10 per GPU-hour earns $18,104.

Gross returns are measured before management fees, expenses and carried interest; net returns are measured after them and are closer to what an investor receives. Under the SEC Marketing Rule, an adviser that shows gross performance must show net performance with at least equal prominence, for the same period.

NVIDIA’s server platform that joins eight data center GPUs, such as the B300 or H200, on one baseboard linked by NVLink and NVSwitch. Server makers build it into their own 8-GPU servers, which is why lenders value GPUs as whole nodes.

The discount rate at which the present value of an investment’s cash flows equals zero: its annualized return, taking into account when each cash flow arrives.

A loan’s amount divided by the value of its collateral. At a 70% LTV, $100 of GPUs carries $70 of debt and $30 of equity.

Total value returned and remaining, divided by the capital invested. A 2.0x MOIC doubles the money but says nothing about how long that took; IRR measures the time.

A cloud provider that specializes in renting GPU capacity for AI training and inference, as distinct from the large diversified cloud providers, the hyperscalers, such as AWS, Microsoft Azure and Google Cloud.

NVIDIA’s high-bandwidth link between GPUs. In HGX B300 servers it runs at 1.8 TB/s per GPU, against 900 GB/s in H200 servers; PCIe cards such as the RTX PRO 6000 Server Edition have no NVLink.

Credit that an equipment maker or its finance arm offers to buyers of its hardware, often with deferred payments in the first months. Smaller operators often cannot qualify.

The customer contract that buys an operator’s capacity, setting term, rate, volume and payment terms. In GPU financing it is usually the main source of repayment, so lenders read it before they look at the hardware.

The amount equipment would likely bring in a sale completed within a limited time, with the seller under some pressure to sell. It is usually lower than fair market value, and lenders often set advance rates from it.

The time an asset takes to repay its cost from its net cash flow. Simple payback divides the cost by the monthly net cash flow, ignoring the time value of money and any value left at the end.

Part of a contract’s value that the customer pays in advance, at signing. It reduces the owner’s capital at risk and is usually credited back against monthly bills over the term.

The power capacity reserved for a customer in a data center, on which colocation is often billed whether or not it is used. It is typically set above the equipment’s nameplate draw, for example nameplate divided by 0.8.

An investor who meets the test in section 2(a)(51) of the Investment Company Act of 1940: generally an individual or family company with at least $5 million in investments, or another person that owns and invests at least $25 million in investments on a discretionary basis. Funds that rely on section 3(c)(7) of that Act may sell only to qualified purchasers.

Finding a new lessee or buyer for equipment after a lease ends or a lessee defaults. A remarketing plan sets out who would do it, where, and at what assumed price.

What equipment is worth at the end of its contract or lease. For GPU servers it is uncertain and can fall quickly as newer chips arrive.

A Regulation D exemption that lets an issuer sell securities without SEC registration to an unlimited number of accredited investors and up to 35 non-accredited purchasers who are financially sophisticated. The issuer may not use general solicitation or advertising to offer the securities.

A Regulation D exemption that lets an issuer use general solicitation and advertising, provided every purchaser is an accredited investor and the issuer takes reasonable steps to verify that status.

What equipment is expected to bring at the end of its useful life, for resale or for parts. A salvage buyout option lets the operator buy the servers at the end of the term on agreed terms.

A loan secured by a claim on collateral that ranks behind a first-lien lender: after a default it is repaid from the collateral only once the senior lender has been repaid in full, so it is usually smaller and priced higher.

The Secured Overnight Financing Rate, a benchmark interest rate based on overnight loans secured by US Treasury securities and published by the Federal Reserve Bank of New York. Floating-rate loans are priced as SOFR plus a margin, such as SOFR plus 5.00%.

A separate legal entity set up to hold specific assets and the debt against them, so that lenders look to those assets and contracts rather than to the parent company.

A contract term under which the customer pays for the capacity it committed to, whether or not it uses it. It turns utilization from a forecast into an obligation.

The length of a loan, lease or contract from start to final payment. Lenders want a loan’s tenor to end inside the customer contract and inside the hardware’s useful life.