Mezzanine Debt

A hybrid form of capital that combines elements of debt and equity, typically structured as subordinated debt with equity warrants or conversion features. Mezzanine financing is often used in leveraged buyouts, growth capital, and recapitalisations, and sits between senior debt and equity in the capital structure.

Debt that holds the highest priority claim on specified collateral in the event of default or liquidation, ranking ahead of unsecured and subordinated obligations. Senior secured lenders benefit from security interests over identified assets such as property, equipment, receivables, or intellectual property.

Debt that ranks below senior obligations in priority of repayment in the event of the borrower's liquidation or default. Subordinated debt holders are repaid only after senior secured and senior unsecured creditors have been satisfied in full.

A hybrid lending structure that combines senior and subordinated debt into a single facility with a single blended interest rate, simplifying the capital structure and reducing negotiation complexity. Unitranche facilities are provided by a single lender or lending group and eliminate the need for separate intercreditor agreements between senior and mezzanine lenders.

A form of debt financing available to venture-backed startups that supplements equity financing without requiring the dilution of additional equity rounds. Venture debt is typically structured as term loans with warrants giving the lender the right to purchase equity, and is used to extend runway, finance equipment, or bridge between funding rounds.

The implied cost of future rework caused by choosing a faster, easier, or less thorough solution during software development instead of a better approach that would take longer. Technical debt accumulates interest in the form of increased maintenance costs, reduced development velocity, and higher defect rates.

A form of receivables financing in which a business sells its outstanding invoices to a third-party factor at a discount in exchange for immediate cash. The factor assumes responsibility for collecting payment from the underlying debtors and bears the credit risk in non-recourse arrangements.

A financing feature that allows a borrower to make interest payments by issuing additional debt or equity instruments rather than paying cash, thereby conserving cash flow during periods of investment or growth. PIK interest accrues and compounds, increasing the principal balance over time.

Does HSBC lend against intangible assets?

Yes, as part of a wider facility. HSBC UK evaluates intangible assets within its Growth Lending (launched 2022, £350m since December 2023) but has published no IP loan size or advance rate.

How should companies account for AI infrastructure investments?

AI infrastructure investments — including GPU clusters, MLOps platforms, and data pipelines — are accounted for as either tangible assets (hardware), intangible assets (software platforms), or operating expenses depending on their nature and usefu...

What does it mean to be transparent about technology debt?

Technology debt—quick hacks, legacy code, unscaled infrastructure—should be acknowledged and itemized. Hiding it until post-acquisition acquisition is fraud.