Launching a debt fund
sounds simple enough, right?

Raise some money, lend it out,
make returns, but if you don't

set the structure up exactly
right, legally, financially and

with investors trust that dream
can collapse fast. So let's walk

through how to build a fund that
lasts and scales. I'm Tilden

Moschetti, founder of Moschetti
Syndication Law. I help fund

managers and syndicators set up
bulletproof structures that

protects them legally and keeps
their investors happy. Today I'm

going to show you exactly what
you need to know to build a debt

fund the right way from the
first dollar to your first

distribution.

When people hear debt fund, they
usually imagine something

complicated, but the concept
itself is simple. You're raising

money in order to lend it out.
That's it. Instead of owning an

asset like an apartment
building, your fund acts more

like a private bank giving out
loans to qualified borrowers.

Your investors don't want
speculative returns. They want

predictable, contractual income
and debt. Funds can lend into

many spaces, real estate, bridge
loans, small business,

expansion, acquisition
financing, even litigation

finance. But knowing what a debt
fund is naturally leads to the

next question, how do you
legally and structurally protect

yourself while you're running
it? Well, your first real step

is building that entity that
owns and operates the fund.

Usually it's either an LLC,
giving you tax flexibility and

easy management, or a limited
partnership, great for setting

up clear manager versus investor
roles. If you pick wrong and

it's just not a tax headache,
you could be personally liable

if a borrower sues or if an
investor feels misled. Choosing

the right entity isn't
glamorous. It won't impress your

investors, but it's absolutely
foundational for everything

you're going to do next, because
once your legal shell is built,

it's time to figure out how the
money inside it will flow. If

your entity is the house, your
financial structure is the

plumbing, you'll need to know
what interest rate you're

charging the borrowers. Is it
fixed? Is it adjustable? Are you

adding origination or servicing
fees? How often are you paying

distributions to your investors,
monthly, quarterly, and are you

realistic about cash flow?
Remember, borrowers might pay

late. Investors don't like
hearing sorry the check's late

too. Planning your fees, your
payouts, your reserve policies

right now isn't just smart, it
builds the system your investors

will rely on later, and once the
financial flow is designed, the

next job is making sure you stay
compliant while moving that

money. So let's be crystal
clear, when you're taking

outside money, you're in
securities law territory, almost

every debt fund will rely on
Regulation D, usually 506 B, or

506 C, 506 B, if you're raising
privately through existing

relationships, or 506 C, if you
want to advertise to the world

but only take in credited
investors, whichever path You

pick, you must file your form D
with the SEC handle State Blue

Sky filings wherever your
investors live, you see,

compliance isn't an
afterthought. It's the guard

rails that keeps your fund
alive, and part of compliance

and building credibility is
showing investors everything

clearly before they write that
first check, here's where you

set the tone for your fund, your
documents, your private

placement memorandum, or ppm,
spells out every risk, every

fee, every promise you're making
and not making. Your operating

agreement explains how decisions
get made. Good documents don't

just protect you from lawsuits.
They show investors that you are

serious, that you are
professional, and you know

exactly what you're doing,
because once those documents are

signed and investors come in,
the real job starts managing

relationships. Investors don't
just want returns, they want

communication. So set
expectations early. What

payments to expect, how often
updates will come, what happens

if things don't go exactly to
plan? Just be clear. Be

consistent. Be transparent. Good
Returns. Build loyalty.

But good communication builds
something even more valuable,

reputation, and speaking of
protecting your reputation,

nothing does that better than
managing risk from day one, no

loan is bulletproof. Borrowers
default, market shift, stuff

happens. Smart managers keep
conservative loan to value

ratios, diversify across
multiple borrowers, industries

and geographies have clear plans
ready for loan workouts and

recoveries. Risk Management
isn't what gets you the first

investor check, but it's what
keeps you from losing the next

10 investors. Which brings us to
the most important lesson, most

mistakes aren't flashy. They're
basic, using bad templates for

legal documents, advertising
improperly without choosing the

right Reg D path over promising
guaranteed returns, LAX

underwriting that brings in
risky loans. When you're

building a fund, it's easy to
think you can clear things up

later. Don't set it upright
today, and you'll avoid massive

headaches tomorrow. Debt funds
aren't complicated, but getting

them right requires you to build
on solid foundations, legal,

financial and relational. If you
want help setting up a debt fund

that attracts investors,
protects you and grows the right

way, reach out to us. I'm Tilden
Moschetti, thanks for joining me

now go and build something that
lasts you.