Subordinated Debt

A hybrid form of financing that sits between senior debt and equity in the capital structure, typically unsecured or subordinated to senior lenders. Mezzanine debt carries higher interest rates than senior debt (often 12-20%) and frequently includes equity kickers such as warrants or conversion rights.

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.

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 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.

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.

A loan with a specified repayment schedule and maturity date, drawn in full at inception (or in agreed instalments) and repaid through regular principal and interest payments over its term. Term loans may be amortising (with regular principal repayments) or bullet (with principal repaid in full at maturity).

A provision in a loan agreement that triggers a default under the agreement if the borrower defaults on any other debt obligation, even if the borrower is current on the loan containing the cross-default clause. Cross-default clauses protect lenders by ensuring they are immediately informed and can take action when a borrower's creditworthiness deteriorates, preventing other creditors from gaining preferential treatment.

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.

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...

How much can I borrow against my IP?

Published UK bank terms cap the advance at 50% of the independently assessed IP value (orderly disposal value at the Royal Bank of Scotland), and the loan is the lower of that and the debt your cash flow can service.

What DSCR do lenders require for an IP-backed loan?

Lenders typically look for a debt service coverage ratio of around 1.20 to 1.25 times as a minimum. Below 1.0 means cash flow cannot cover repayments, which no lender will accept.