Financing Big Business Deals Using Senior Debt

Many people do not take the time to research more on the topic of credit given that it is a major part of business. Being able to access credit has allowed many companies to grow and expand their businesses. Many people turn to banks and other financial institutions to help them grow their net worth, get into business and also buy assets that they need.





Understanding credit and debt is extremely important when it comes to policy making and taking crucial decision. Credit and senior debt are classified based on different factors. This will differ from state to state and from country to country. One kind of debt that should clearly be understood is senior debt.


Among the different debts out there, one of the ones that is becoming more and more common is senior debt. Senior debt takes the highest priority in relation to other forms of debt in terms of repayment. If you have two loans from a bank, senior debt and ordinary debt, should you be unable to make your repayments, senior debt will be paid first when your assets are liquidated followed by the other forms of debt. Banks enjoy this kind of guarantee because the chances of not getting paid are low.

There are generally two kinds of loans; high risk and low risk. Senior loan is classified as low risk. This simply means that the bank is taking a lower risk and they are guaranteed that the loan will be repaid even in extremely situations like bankruptcy or insolvency. Low risk loans attract a lower interest rate and one gets to repay them over a longer period of time. Higher risk loans on the other hand are charged more in terms of interest and the repayment period can be much shorter.


Senior loans are extremely common in the real estate market and to companies handling huge international projects especially because this kind of loan requires less equity than other loans. This ensures that the loan accessed gives enough gearing to ensure that a company succeeds in the project being handled. Many companies turn to this kind of credit when the business situation demands address and financing options are limited.


The terms of senior debt as always will differ from bank to bank but in all cases, it is required that a collateral be put in place to cover the debt in case of any eventualities. The collateral can cover the debt in full or in part depending on the terms. It is good to note that the loan will be covered only to the extent of the collateral provided and not more. Full repayment therefore hinges on this.


Every business man and company needs to have a good relationship with a couple of lending institutions. Your choice will depend on what you are looking for. Take time and do a thorough research and ensure that you work with the right financial partner to avoid disappointment and making losses. If others are happy with their services, then that is a good choice for you to consider.


Many people fear credit but when wisely used, credit is a great way to expand your business and personal interest. You get money to use which you can repay slowly as your projects become profitable.