Part of the financing for a purchase operation that is not purely own resources or normal bank debt. It consists of granting a right to the lender to convert the debt into ownership or equity participation, in case the loan is not repaid within the agreed term. It has higher risk and return than pure debt and can take various forms, such as junk bonds, preferred stock or bank debt, with certain conversion rights and safeguards. It is therefore a hybrid between debt and traditional equity financing, commonly used for the expansion of established companies.
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