Accordion Feature

Dictionary Says

Definition of 'Accordion Feature'


A type of option that a company can buy that gives it the right to increase its line of credit or similar type of liability with a lender. Companies typically purchase an accordion feature in anticipation of the need for more working capital for possible expansion opportunities.


Investopedia Says

Investopedia explains 'Accordion Feature'


For example, suppose company ABC has established a $100,000 line of credit with the Bank of XYZ. Company ABC has also purchased an "accordion feature" that would let it increase its total debt commitment of $100,000 to $150,000 because Company ABC believes that it will need an additional $50,000 if it decides to add a new sales division.

This term's origin is derived from how an accordion can be pulled and stretched in a manner that lengthens its total size.



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