Tranche is a versatile term meaning a defined portion of a larger whole. In lending, the three main uses are:
1. **Drawdown tranche**, a stage of advance on a staged facility. A $5m development loan with five $1m tranches advances the first tranche at settlement and subsequent tranches against milestone completion.
2. **Structured facility tranche**, a layer in a structured warehouse or securitisation. A warehouse facility might have a senior tranche, mezzanine tranche, and equity tranche, each priced at a different rate reflecting the risk position.
3. **Investor tranche**, a class of units or notes in a fund or trust. Some private credit funds offer multiple unit classes (e.g. a senior unit paying a fixed yield, an equity unit absorbing first-loss risk in exchange for upside), each class is a tranche.
Tranched structures are common in institutional private credit warehouses but unusual in retail-oriented funds.