To manage the uncertainty of an athlete's draft position, specialized lenders calculate a projected draft value by averaging multiple "big boards" and then applying a downward standard deviation. They further mitigate risk by lending a maximum of only 10% of this conservative, de-risked projection, ensuring a high margin of safety.

Unlike traditional debt, selling a percentage of future earnings can lead to predatory lending lawsuits, as seen with Fernando Tatis. He received $2 million for 10% of future earnings as a teenager, which became a $33 million liability after his mega-contract. This model's high effective cost creates significant legal and reputational risk for funders.

The NIL market rapidly escalated from modest monthly payments to multi-million dollar contracts. The turning point was a Tennessee collective's $8.5 million deal for a junior in high school, which set a new precedent and transformed the landscape from marketing support to a full-blown talent acquisition bidding war.

Contrary to the perception that alternatives are complex, their core business models are often simpler than many public market instruments. The concept of direct lending (loaning money and collecting interest) is more straightforward for a retail investor to grasp than the mechanics of a structured note sold by a bank with embedded options.

The NIL arms race has created a new financing need for universities themselves. They are now turning to private credit funds for multi-million dollar loans to cover recruiting expenses and six-figure commitment bonuses. These loans are secured by the athletic department's predictable TV revenue, creating a stable, asset-backed lending opportunity.

Corporations are increasingly shifting from asset-heavy to capital-light models, often through complex transactions like sale-leasebacks. This strategic trend creates bespoke financing needs that are better served by the flexible solutions of private credit providers than by rigid public markets.

To provide non-recourse financing, the firm structures the deal not as a loan but as a co-investment in a new LLC. The customer contributes common equity (first-loss capital), while the firm's financing is preferred equity. This legally shields the investor's personal assets and makes the capital non-callable.

To fix the student debt crisis, universities should be financially on the hook for the first portion of any loan default (e.g., $20,000). This "first loss" position would compel them to underwrite the economic viability of their own degrees, creating a powerful market check against pushing students into overpriced and low-value programs.

Despite high earning potential, young athletes are often rejected by conventional private banks. Bank regulations require underwriting based on historical balance sheets, which a 21-year-old lacks. This creates a market gap for specialized lenders who can underwrite based on guaranteed future contract value, not past financial history.