Firm Commitment

AAA

DEFINITION of 'Firm Commitment'

1. A lending institution's promise to enter into a loan agreement with a specific entity within a certain period of time.

2. An underwriter's agreement to assume all inventory risk and purchase all securities directly from the issuer for sale to the public at the price specified.

INVESTOPEDIA EXPLAINS 'Firm Commitment'

1. The lender specifies the terms that that must be met in order for the loan to be processed. Also known as a "standby loan commitment".

2. In a firm commitment, underwriters act dealers and are responsible for any unsold inventory. The dealer profits from the spread between the purchase price and the public offering price. Also known as a "firm commitment underwriting".

RELATED TERMS
  1. Dealer

    A person or firm in the business of buying and selling securities ...
  2. Distributing Syndicate

    A group of investment banks that work to underwrite and sell ...
  3. Committed Facility

    A credit facility whereby terms and conditions are clearly defined ...
  4. Competitive Bid

    A step in the initial public offering process whereby an underwriter ...
  5. Best Efforts

    An agreement in which an underwriter promises to make a full-fledged ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
Related Articles
  1. Fundamental Analysis

    Interpreting A Company's IPO Prospectus ...

  2. Investing

    5 Tips For Investing In IPOs

  3. Options & Futures

    Pre-Qualified Vs. Pre-Approved - What's ...

  4. In 2014, stock markets traded at record levels and the US IPO market enjoyed activity not seen since the 2000 tech bubble. Here is a snapshot of some of the year’s most successful IPOs.
    Investing News

    5 IPOs That Broke The Markets In 2014

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center