Subordinated loan

Generally, a loan in which the creditor ranks behind the claims of other lenders from the outset in the event of the debtor’s insolvency (debt which ranks after other debts should a company fall into insolvency or be closed). In detail, a variety of contractual conditions are possible and also common. Due to the subordination, the loan is subject to a high risk of default, which must be compensated for by a significantly higher interest rate. – The main advantage of a subordinated loan on the part of the debtor is that the contractual term is generally longer than for a normal bank loan. In addition, with bullet repayment combined with bullet interest, the financing costs can be postponed in their entirety to a later date. For start-ups in particular, this provides a time buffer that is often crucial to success. – Subordinated loans are generally classified as mezzanine capital.

Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/