Cash flow loan

Cash flow loan is a type of debt financing, in which a bank lends funds, generally for working capital, using the expected cash flows that a borrowing company generates as collateral for the loan.

To secure repayment, the bank covenants a borrower on such levels and ratios as enterprise value, EBITDA, total interest coverage ratio, total debt/EBITDA, and so on. They will also take a charge over the assets of the business to provide the lender with the ability to take control of the cash flows in the event of default.

In contrast, an asset-based loan is lent against company's assets. Senior stretch loan is the mix of the two.

Cash flow loans are usually senior term loans or subordinated debt, being used for funding growth or financing an acquisition.

Structured finance

Securitization	Securitization transaction Credit enhancement Tranche

Types of Securities	Asset-backed security (ABS) Mortgage-backed security (MBS) Credit derivative Credit default swap (CDS) Collateralized debt obligation (CDO) Collateralized mortgage obligation (CMO) Collateralized bond obligation (CBO) Collateralized loan obligation (CLO) Collateralized fund obligation (CFO) Senior stretch loan Structured product

This article is issued from Wikipedia - version of the Sunday, January 18, 2015. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.

Cash flow loan

See also