Subordinated Debt

Description: This growth and transition capital may not have specific tangible security and typically relies on the stability and adequacy of cash flow from the business to service the debt. In certain forms, this product may also be referred to as 'second lien' or 'mezzanine financing'.

Benefits:

  • Facilitates growth and transition transactions, frequently without diluting the owner's equity in the business
  • Enables transactions that are not supported by collateral security
  • Tailored to the client's individual needs and situation
  • Highly customized based on the strength of the business, security particulars, repayment terms, and debt servicing capacity
  • Security may be subordinated to the prior lien of a senior lender
  • Amortization up to 10 years
  • Interest rates vary
  • May include some equity ownership as additional consideration for the loan, depending on the amortization and the strength of the business
  • Management buyouts
  • Mergers & acquisitions
  • Growth & expansion programs
  • Succession plans
  • Financing capital requirements where little tangible security is available

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