Such loans are suitable for two types of companies:
- Companies that have substantial asset base but do not have stable or predictable cash flows. For example, troubled or turnaround companies. Cash flow loans would be much smaller and more expensive for these companies.
- Companies with healthy cash flows but lower assets. In this case, a pure asset-based loan would be insufficient.
For both types, the senior stretch debt structure takes advantage of the combination of the company’s assets and cash flow to make significantly more debt available than would have been otherwise.
- ^“Is It Time For A Stretch Loan For Your Business”. swiftmoney.com. Retrieved 2015-03-04.
- ^“Senior stretch loan”. Investopedia. investopedia.com. Retrieved 29 November 2017.
- ^Bell, Diana (November 21, 2016). “How Attractive is the Stretch Senior Loan?”. Retrieved 29 November 2017.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.