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Shareholder loan is a debt-like form of financing provided by shareholders. Usually, it is the most junior debt in the company's debt portfolio. On the other hand, if this loan belongs to shareholders it could be treated as equity. [1] Maturity of shareholder loans is long with low or deferred interest payments.
In corporate finance, free cash flow to equity (FCFE) is a metric of how much cash can be distributed to the equity shareholders of the company as dividends or stock buybacks—after all expenses, reinvestments, and debt repayments are taken care of.
Likewise, in dissolution, repayment to debt holders ranks higher than distributions to preference holders and equity holders. Equity holders (shareholders) have all rights in the business, but the debt holders have no rights in the business. A company that is highly geared (UK), or leveraged (US), has a high debt-to-equity capital ratio.
Rivian also has the option to take a $1 billion loan from Volkswagen in October 2026. The loan would be backed by Rivian's stake in the joint venture. Rivian would have 10 years to repay, but it ...
The analogy with options arises in that limited liability protects equity investors: (i) where the value of the firm is less than the value of the outstanding debt, shareholders may, and therefore would, choose not to repay the firm's debt; (ii) where firm value is greater than debt value, the shareholders would choose to repay—i.e. exercise ...
In finance, seniority refers to the order of repayment in the event of a sale or bankruptcy of the issuer. Seniority can refer to either debt or preferred stock. Senior debt must be repaid before subordinated (or junior) debt is repaid. [1] Each security, either debt or equity, that a company issues has a specific seniority or ranking.
Upstart (NASDAQ: UPST) transforms traditional lending by deploying AI across the loan approval process. The company's platform evaluates over 1,600 unique data points to assess borrower ...
While subordinated debt may be issued in a public offering, major shareholders and parent companies are more frequent buyers of subordinated loans. These entities may prefer to inject capital in the form of debt, but, due to the close relationship to the issuing company, they may be more willing to accept a lower rate of return on subordinated ...