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.

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 buyouts to manage a degree of leverage.
• Shareholders can extend the loan in distressed or near-default situations to save the company.^[3]

See also

• Hybrid security
• Seniority (finance)
• Venture lending

References

External links

• Tax aspects of contributions to capital of shareholder loans

Corporate finance and investment banking Capital structure Convertible debt Exchangeable debt Mezzanine debt Pari passu Preferred equity Second lien debt Senior debt Senior secured debt Shareholder loan Stock Subordinated debt Warrant Transactions (terms / conditions) Equity offerings At-the-market offering Book building Bookrunner Corporate spin-off Equity carve-out Follow-on offering Greenshoe Reverse Initial public offering Private placement Public offering Rights issue Seasoned equity offering Secondary market offering Underwriting Mergers and acquisitions Buy side Control premium Demerger Divestment Drag-along right Management due diligence Pitch book Pre-emption right Proxy fight Sell side Shareholder rights plan Special situation Squeeze out Staggered board of directors Super-majority amendment Tag-along right Takeover Reverse Tender offer Leverage Debt restructuring Debtor-in-possession financing Financial sponsor Leveraged buyout Leveraged recapitalization High-yield debt Private equity Project finance Valuation Accretion/dilution analysis Adjusted present value Associate company Business valuation Conglomerate discount Cost of capital Weighted average Discounted cash flow Economic Value Added Enterprise value Fairness opinion Financial modeling Free cash flow Free cash flow to equity Market value added Minority interest Modigliani–Miller theorem Net present value Pure play Real options Residual income Stock valuation Sum-of-the-parts analysis Tax shield Terminal value Valuation using multiples List of investment banks Outline of finance