 |
|
|
|
|
MASARI, INC. Professionals Business Advisors |
|
|
||
home | business loans | commercial mortgage | residential mortgage | auto loans
|
Conference_Centers
Main Office (714) 210-3979 Masari, Inc.
|
What is Subordinate Financing?
The term
'subordinate financing' refers to a hybrid product that brings
together some features of both debt financing and equity
financing. Subordinate
financing mimics debt financing because the borrower has the
obligation to repay the loan. Moreover, part of the cost is in
the form of a fixed interest coupon (a deductible expense.)
Subordinate financing also has characteristics similar to
equity financing in that the repayment of the loan is based on
cash flow, rather than depreciating company assets, and
because it is subordinated to secured lenders. Subordinate
financing has also been referred to as 'Subordinated debt',
'Mezzanine financing', 'Structured equity', 'Equity linked
notes' and 'Quasi-equity'. Share the risks and the
rewards. The borrower's
future cash flow determines the appropriate amount of
subordinate financing. However, the company's market position
and management's commitment are more important than the value
of guarantees.
The yield for
subordinate financing is partially based on the success of
your company, since the product has a provision for a stock
option or royalties on sales or future cash flow. Subordinate
financing lenders may expect a yield of 18 to 22% but it can
vary depending on your financial results. The pricing
structure is based on risk and benefit sharing.
Home | Business
Loans | Commercial
Mortgage | Residential
Mortgage | Auto
Loans |
Equal Housing Lender.