Lecture 8 - Debt

Lecture 8 - Debt - Debt Bus M 475 Sources of Debt Banks...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Debt Bus M 475
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Sources of Debt Banks Shareholders Leasing companies Private investors “Vultures” Factoring companies
Background image of page 2
Cost of Debt If the cost of debt is generally lower than the cost of equity, why not finance everything with debt? What type and how much is appropriate? Covenants Restrictions Term Availability Risk Your asset base Current encumbrances Value-add from equity
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Top 10 Debt Terms 1. 1. Principal Principal 2. 2. Interest Interest 3. 3. Amortization Amortization 4. 4. Balloon Balloon 5. 5. Debt Coverage Ratio Debt Coverage Ratio 6. 6. Term Debt Term Debt 7. 7. Note Note 8. 8. Line of Credit Line of Credit 9. 9. Borrowing base Borrowing base 10. 10. Senior, junior and mezzanine debt Senior, junior and mezzanine debt
Background image of page 4
LTV Borrowing against tangible assets Example: Land appraised at $1mm – you can borrow $800k on that if you have an 80% LTV Examples of LTV by asset class: What is a lien and why does it matter? LTV
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 10

Lecture 8 - Debt - Debt Bus M 475 Sources of Debt Banks...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online