The participatory loan. A good way to finance your company
Posted: Mon Dec 23, 2024 8:24 am
One of the lesser-known ways of financing a company is the participatory loan . This is a form of financing through which an entity or an investor lends money to a company based on a business plan that it considers attractive. The interest on repayment is conditional on the company's performance, and it may be stipulated that the loan be converted into a share in the company's share capital.
The characteristics of participatory loans are set out in article 20 of Royal Decree-Law 7/1996, of 7 June, on urgent fiscal measures and the promotion and liberalisation of economic activity. They are as follows:
1- This is a long-term loan with variable interest . The interest is determined based on the evolution of the activity of the company receiving the financing, although it is also possible to agree on a fixed interest rate, regardless of the evolution of the business.
This gives the phone number in us company a wide margin of time to carry out its project without being overwhelmed by financing costs. They usually have a long grace period to repay the principal.
2.- A penalty may be agreed in the event of early repayment , provided that an increase in equity of an equivalent amount is made. Since the participating loan can be considered as equity, its repayment would cause a decrease in net worth. Hence the obligation to offset it with a capital contribution.
3.- Participating loans, in order of priority of credits, will be placed after the common creditors . That is, if the project does not go ahead and the company had to declare bankruptcy, the lender would collect after the rest of the creditors.
The characteristics of participatory loans are set out in article 20 of Royal Decree-Law 7/1996, of 7 June, on urgent fiscal measures and the promotion and liberalisation of economic activity. They are as follows:
1- This is a long-term loan with variable interest . The interest is determined based on the evolution of the activity of the company receiving the financing, although it is also possible to agree on a fixed interest rate, regardless of the evolution of the business.
This gives the phone number in us company a wide margin of time to carry out its project without being overwhelmed by financing costs. They usually have a long grace period to repay the principal.
2.- A penalty may be agreed in the event of early repayment , provided that an increase in equity of an equivalent amount is made. Since the participating loan can be considered as equity, its repayment would cause a decrease in net worth. Hence the obligation to offset it with a capital contribution.
3.- Participating loans, in order of priority of credits, will be placed after the common creditors . That is, if the project does not go ahead and the company had to declare bankruptcy, the lender would collect after the rest of the creditors.