Pari-Passu
What is Pari-Passu? Pari-passu is a Latin term that means “ranking equally and without preference.” Applied in a legal context, pari-passu means that multiple parties to a contract, claim, or obligation are treated the same, “ranking equally and without preference.” Uses and Applications of the Pari-Passu Principle Lending The term pari-passu is popular in the...
Non-Purpose Loan
What is a Non-Purpose Loan? A non-purpose loan is a type of loan that involves complex structuring and uses investment securities as collateral. Borrowers do not need to liquidate their securities and can continue to receive the interest and dividend income from their securities. How Does a Non-Purpose Loan Work? Financial institutions and brokerages offer...
Imputed Interest
What is Imputed Interest? Imputed interest is the interest that is estimated to be collected by the lender, regardless of what the lender actually receives. Tax collection agencies use imputed interest to collect tax revenue on below-market loans and zero-coupon bonds. Calculating Imputed Interest Tax Implications – Base Scenario Generally, lenders must report interest income...
Call Loan
What is a Call Loan? A call loan is a type of loan where the lender can demand repayment from the borrower at any time. It is different from other loans because it is repayable on demand instead of being repaid based on a fixed schedule. Call loans are usually offered by banks to brokerage...
Liquidation Preference
What is Liquidation Preference? Liquidation preference determines the order in which a bankrupt firm’s liquidated assets are paid out to claimants of the firm. It is determined based on the clauses in outstanding agreements and contracts by a liquidator. Further, the liquidation preference can also influence the value of financial securities as it can alter...
