Accordion Feature


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.

BREAKING DOWN '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.

  1. Working Capital

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  2. Creditor

    An entity (person or institution) that extends credit by giving ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Option

    A financial derivative that represents a contract sold by one ...
  5. Revolving Credit

    A line of credit where the customer pays a commitment fee and ...
  6. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
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