Subordinated loan

In the field of finance, a subordinated loan is a type of loan which ranks after other debts should a company fall into receivership or be closed. It is also known as subordinated debt, or as junior debt.

This means these loans are repayable after other debts have been paid and due to this are more risky for the lender of the money. It is unsecured and has lesser priority than that of an additional debt claim on the same asset.

Major shareholders and parent companies are most likely to provide subordinated loans as an outside party providing funds through such a loan normally wants compensation for the risk of the loan. However this means subordinated loans have a higher expected rate of return than se