Debt Accordions

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DEFINITION of 'Debt Accordions'

A loan provision which allows the borrower to add additional investors to the loan subsequent to the initial loan date. This provision helps the borrower if they are struggling to make payments, and in turn, helps the lender receive the full payments.

INVESTOPEDIA EXPLAINS 'Debt Accordions'

Debt accordions generally occur with regards to commercial loans. If the company is going through a rough patch, it is often in the shareholder's best interests to take on some of the debt liability, rather than see the company go bankrupt, leaving them with nothing. This is especially common if the debt is collateral debt, where the collateral is necessary to continue business operations.

RELATED TERMS
  1. Shareholder

    Any person, company or other institution that owns at least one ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Debt

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

    Relating to commerce. In the investment field, the term "commercial" ...
  5. Debtor

    A company or individual who owes money. If the debt is in the ...
  6. Accordion Feature

    A type of option that a company can buy that gives it the right ...
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