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."
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