Transaction Structure

The mechanism through which investors and companies agree to exchange financial capital

CO-LENDING AGREEMENT Agreement made between two or more lenders concerning how they will jointly interact with the same borrower.

CROWDFUNDING Process of soliciting capital from the general public, including non-accredited investors, without the use of a registered underwriter, often leveraging internet platforms.

DPO Direct Public Offering is a structure in which a company offers stock directly to the general public, including non-accredited investors, without the use of a registered underwriter.

EQUIPMENT FINANCING Loan made to an enterprise with the purpose of purchasing equipment.

ESCROW ACCOUNT Contractual arrangement in which a third party (escrow agent) receives and disburses money or property for the primary transacting parties, based upon agreed conditions.

ISA Income Sharing Agreement is a debt repayment structure based on a percentage of future or current income for a discrete time period. Most commonly applied to student loans.

IPO Initial Public Offering is a structure in which a company uses an underwriter to establish an initial value for stock ownership of the company, then sells the stock on public exchanges to investors.

MORTGAGE Debt obligation secured by real estate owned by the borrower.

PARTICIPATION AGREEMENT A lending institution agrees to fund a portion of a larger loan commitment and allow a lead funder to administer the loan.

PAY-FOR-SUCCESS Deal structure in which repayment terms are based on the achievement of pre-established, observable metrics, usually defined by social impact. Social Impact Bonds are an example.

RECOVERABLE GRANT Grant made under predetermined circumstances that can become repayable, potentially with interest. Recoverable grants are different from loans in that they are forgivable.

ROYALTY FINANCE Form of debt in which lenders agree to be repaid based on an agreed upon formula, usually a percentage of revenue (a royalty).

SELF-LIQUIDATING EQUITY Form of structured exit in which an equity position is repaid using a pre-determined formula (such as available free cash flow) up to a cap.

SPV Special Purpose Vehicle is a standalone legal entity formed for the purpose of financing a specific project or business operation, often on a temporary basis.

STRUCTURED EXIT Pre-negotiated arrangement for an investor to sell a debt or equity position at a later date to realize an investment gain. This replaces traditional exits in which the investor is paid out when the company is acquired.

TAX CREDIT STRUCTURE Transaction in which the investor pays in advance for expected future tax credits related to project finance.

VARIABLE DIVIDEND VEHICLE Form of equity in which shareholders receive distributions (dividends) of available excess cash based on an agreed upon formula.

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