 | This article does not cite any sources. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Distressed lending" – news · newspapers · books · scholar · JSTOR (September 2018) (Learn how and when to remove this message) |
Distressed lending typically provides credit facilities to borrowers with good cash generation capacity but short-term liquidity issues.
Liquidity lending versus collateral lending
Distressed loans typically take the form of bridge or Mezzanine capital or similar hybrid structures and often place the distressed lender in a better position than existing common shareholders and lenders with respect to company's assets and cashflow.
Versus asset backed lending ("ABL")
Distressed lending can be contrasted with asset backed lending in that ABL typically provides collateralized credit facilities to borrowers with high financial leverage and marginal cash flows. ABL's primary focus is on collateral and liquidity with leverage and cash flow being secondary considerations. Borrowings under an asset-based facility are limited by the collateral base, which is measured by liquidation value of accounts receivable, inventory and fixed assets rather than by reference to direct, ongoing cash generation capacity.
See also
- Annual percentage rate (a.k.a. Effective annual rate)
- Bank, Fractional-reserve banking, Building society
- Credit risk
- Debt, Consumer debt, Debt consolidation, Government debt
- Default (finance)
- Finance, Personal finance, Settlement (finance)
- High-yield debt
- Interest-only loan, Negative amortization, PIK loan
- Loan guarantee
- Loan sale
- Payday loan
- Private equity
- Refund anticipation loan
- Stafford loan
- Student loan
- Student loan default
- Syndicated loan
- Title loan