Various Economic Options Obtainable

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 debt are classified based on different factors for mezzanine debt. This will differ from state to state and from country to country. One kind of debt that should clearly be understood is senior debt.


Senior debt definition is a special category of debt that received higher priority than other subordinate debts in terms of principal and interest even when the funds are issued by the same institution. When it comes to repayment, the debt gets first priority. This means that when a company goes under or one files for bankruptcy, senior debt will get priority over other forms of debt and therefore it is first in the repayment schedule. The rule is secured loans are always paid first before unsecured loans.

Senior debt finance is considered low risk by the lender simply because of the priority it is given. It has what is called a secure claim and should the worst happen, the loan in given top priority in terms of repayment. There is a direct relationship between security and interest rates charges. When security is high, less interest rates are charges and this is the case with senior debt. Unsecured loans on the other hand attract much higher interest so as to cover for the risk that the lending institution is taking.


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.


In order to access senior debt, you must provide collateral on which first lien is placed. In the event that you are unable to pay the loan, the collateral is liquidated to cover the loan. As stated, senior debt received first priority of repayment but in some cases, fully repayment is not possible. This is especially so if the collateral is not sufficient to cover the loan and the accrued interest.


If you do not understand how financing works, you will not be able to take full advantage and push your projects as well as your business forward. Take time and investigate different financial institutions and talk to others who have used their services in the past. Watch out for things such as customer care, how they deal with late repayment and the interest rates they charge.


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.