What Is a First Lien Loan—and Why It Matters to Investors

When it comes to investing, the real question isn’t how things go when everything’s perfect.
It’s what happens when things don’t go as planned.

That’s why at LBC Capital Income Fund, LLC, protecting investor capital comes first—always. And one of the most effective ways we do that is by lending in first position, also known as issuing a first lien loan.

So what exactly is a first lien loan? Why does it matter to investors? And how does it reduce your risk while keeping your returns steady?

Let’s walk through it in plain terms.

What Is a First Lien Loan?

A first lien loan is a loan that’s backed by collateral—usually real estate—where the lender has the top legal claim on that property. If the borrower fails to repay, the first lienholder gets paid before anyone else when the asset is sold.

To keep it simple:

• You lend money, and the borrower puts up real property as collateral.
• If they stop paying, you can take action to recover your money by selling the property.
• Because you’re the first position lender, you get paid before other lenders or creditors.

This priority status is what makes first position private debt so powerful. It’s not just about the interest rate—it’s about knowing your investment is protected, even in a worst-case scenario.

Why “First Position” Really Matters

In the world of lending, not all debt is created equal. If there’s ever a problem, who gets paid first makes all the difference.

Here’s how it works if a borrower defaults:

1. The collateral (typically a property) is sold, either through foreclosure or a negotiated process.
2. The proceeds are used to repay lenders and creditors, in order of priority.
3. The first lienholder gets paid first.
4. Only if there’s anything left do second lienholders or unsecured parties get a cut.

That means if you’re in second position, you could be left with nothing. But if you’re in first position, your capital is first in line to be recovered.

How It Works in Practice

Let’s take a simple example.

A borrower needs $500,000 to purchase a property worth $800,000. LBC Capital Income Fund, LLC funds that loan and places a first lien on the property.

If the borrower makes their payments—great. Our investors receive monthly income.

But what if the borrower stops paying?

Because we’re the first lienholder:

• We can initiate foreclosure and take control of the asset.
• We sell the property and use the proceeds to recover the full loan amount.
• Since the original loan was only 62.5% of the property’s value, we have a solid buffer to work with.

In this example, the property would have to lose more than 37.5% of its value before investor capital is at risk.

That’s the kind of downside protection built into first position private debt.

First Lien vs. Second Lien: What’s the Difference?

Here’s a quick comparison of the two:

Some funds chase yield by lending in second position. At LBC Capital Income Fund, LLC, we’d rather protect your capital than stretch for extra points of return. That’s why first lien loans are our standard, not the exception.

Why It Matters to Investors Like You

If you’re looking at private lending opportunities, the structure of the loan matters just as much as the interest rate.

Here’s what being in first position gives you:

• ✅ Stronger protection – If something goes wrong, your capital gets paid back first.
• ✅ Legal control – You have the right to initiate foreclosure and recover the asset.
• ✅ Better recovery potential – Your loan is backed by real equity in the property.
• ✅ More peace of mind – You’re not at the mercy of someone else’s decisions or delays.

This is the difference between investing in speculative yield and investing in structured, secured income.

First Lien Lending at LBC Capital Income Fund, LLC

At LBC Capital Income Fund, LLC, our entire portfolio is built on first position private debt. It’s how we:

• Target 8–10% annualized returns, distributed monthly
• Minimize investor risk
• Maintain low default rates
• Recover capital efficiently when needed

Here’s how we keep your investment secure:

• Every loan is collateralized with real property
• We maintain low loan-to-value (LTV) ratios, usually under 65%
• We underwrite conservatively and only fund borrowers we know can repay
• We manage the asset proactively during the loan term

If a borrower defaults, we don’t wait for someone else to act. We’re in first position, and we move quickly.

Why Safety Doesn’t Mean Sacrificing Returns

Some investors assume that safer loans mean lower returns. But in private lending, the opposite is often true.

Because first lien loans are collateralized, controlled, and short-term, they can deliver steady income without the drama of market volatility.

You get:

• Fixed monthly payouts
• Clear asset backing
• Predictable outcomes
• No tenant issues, no stock market swings, no sleepless nights

In a world full of noise, that kind of clarity is worth its weight in gold.

First In Line = First in Confidence

Smart investing isn’t about avoiding risk—it’s about knowing where you stand when risk shows up.

With a first lien loan, you’re not waiting to see if there’s anything left over. You’re at the front of the line. That’s why first position private debt is a cornerstone of how we protect and grow capital at LBC Capital Income Fund, LLC.

And it’s why our investors trust us to deliver consistent income—month after month, year after year.