understanding financial jargon
When a company wants to borrow money it can do so in a number of ways, by offering investors different types of tradeable debt, or bonds. The least risky from the investors point of view is debt which is secured against the company's assets such as property or land.
However subordinate debt> ranks behind all other forms of debt and trade creditors, and therefore carries more risk. If a company winds up, the secured debt and trade creditors get paid first and subordinate debt holders get paid only if there is anything left over. Share holders receive nothing until all debts have been paid.
With the risks of losing the intial investment being higher for subordinate debt, lenders of such debt will usually require higher rates of return compared to less risky debt investments.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
We hope you found this information useful.
Copyright © Steve Gears Associates. All rights reserved. No portion of this site may be reproduced without written permission. All Trademarks are freely acknowledged.The information on this site is based on UK data unless otherwise indicated. Non-UK visitors should check with experts within their own legal jurisdiction before relying on information presented here.