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Shareholder loan

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Title: Shareholder loan  
Author: World Heritage Encyclopedia
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Subject: Debtor-in-possession financing, Corporate finance, Elektrim, Venture debt, Drag-along right
Collection: Corporate Finance, Loans, Shareholders
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Shareholder loan

Shareholder loan is a debt-like form of financing provided by shareholders. Usually, it is the most junior debt in the company's debt portfolio, and since this loan belongs to shareholders it should be treated as equity.[1][2] Maturity of shareholder loans is long with low or deferred interest payments. Sometimes, shareholder loan is confused with a loan from company extended to its shareholders.

Contents

  • Applications 1
  • See also 2
  • References 3
  • External links 4

Applications

  • This form of financing is quite common while funding young companies with positive cash flows because such firms are still not able to raise debt from banks but need debt anyway to create a tax shield.
  • The contribution of shareholder loans to a corporation's capital structure generally relieves the corporation's debt load and is therefore used in Leveraged buyout (LBOs) to manage a degree of leverage.
  • Shareholders can extend the loan in distressed or near-default situations to save the company.[3]

See also

References

  1. ^ Gelter, Martin and Jurg Roth (2007). "SUBORDINATION OF SHAREHOLDER LOANS FROM A LEGAL AND ECONOMIC PERSPECTIVE". cesifo-group.de. Retrieved 2014-02-04. 
  2. ^ "Shareholder Loans to a Corporation". robertdeejrcpa.com. Retrieved 2014-02-04. 
  3. ^ Subordination of Shareholder Loans from a Legal and Economic Perspective

External links

  • Tax aspects of contributions to capital of shareholder loans
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