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 Summary of chapter 26 : Other debt products
• bank and market products;
• short-, medium- or long-term borrowings;
• loans backed by collateral, unsecured senior loans and subordinated loans.
For small- and medium-sized companies, the choice between bank financing (bank loans) and market financing is skewed in favour of bank financing as their needs do not correspond to the size and liquidity required by financial markets.
The distinction between long-, medium- and short-term financial resources reflects the treasurer's main forecast horizons and, accordingly, the type of information at his disposal.
Giving guarantees or seniority to a loan often allows the interest paid to be lower but limits the financial flexibility of the firm.
Debt market products include long-term financing: bonds (investment grade or high yield depending on the rating of the company) and short-term financing: commercial paper.
Bank debt products include loans for general purpose financing (business loans) for which agreements include standard covenants (positive covenants to comply with certain requirements; negative covenants to limit the financial flexibility of the company; pari passu clauses; cross default clause). Specific purpose financing is backed by assets (factoring, export credit, loans on inventories, . . .).
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