Bullet Transaction

AAA

DEFINITION of 'Bullet Transaction'

A loan in which all principal is repaid when the loan matures instead of in installments over the life of the loan. Only interest is paid during the loan term. A bullet transaction may have two or more tranches, where the different tranches might have different maturities and/or different interest rates. A company might use a bullet loan for working capital, to purchase equipment or to finance an acquisition, among other uses. Revolving loans and term loans can be structured as bullet transactions. A bullet transaction with a maturity of 15 years would be called a "15-year bullet."

INVESTOPEDIA EXPLAINS 'Bullet Transaction'

A bullet loan can be repaid by refinancing or by earning enough cash to repay the loan. A bullet transaction entails greater risk for the lender because if the company does poorly, the lender may not get back any of the principal. Bullet transactions are priced as a number of basis points (bp) over a benchmark such as U.S. Treasuries. Investors can buy certificates to invest in bullet transactions.

RELATED TERMS
  1. Amortization

    1. The paying off of debt in regular installments over a period ...
  2. Amortization Schedule

    A complete schedule of periodic blended loan payments, showing ...
  3. Balloon Payment

    An oversized payment due at the end of a mortgage, commercial ...
  4. Accrued Interest

    1. A term used to describe an accrual accounting method when ...
  5. Interest

    1. The charge for the privilege of borrowing money, typically ...
  6. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
Related Articles
  1. Don't Be Misled By Investment Advertising
    Home & Auto

    Don't Be Misled By Investment Advertising

  2. War's Influence On Wall Street
    Bonds & Fixed Income

    War's Influence On Wall Street

  3. What You Need To Know About Net Neutrality
    Stock Analysis

    What You Need To Know About Net Neutrality

  4. The Income Property: Your Late-In-Life ...
    Home & Auto

    The Income Property: Your Late-In-Life ...

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center