DEFINITION of 'Senior Stretch Loan'

A specific type of loan to a business entity, which possesses certain characteristics of both asset-based loans and cash-flow loans. Senior stretch loans are cheaper than straight cash-flow loans, since the borrowing company has a healthy balance sheet and generates sufficient cash flows to satisfy their obligations.

BREAKING DOWN 'Senior Stretch Loan'

Senior stretch loans usually provide financing that is equal to more than the total lending value of the borrower's current and fixed assets. However, the borrower must show the capacity to repay this type of loan either through high operational cash flows or a strong balance sheet consisting of a substantial asset base.

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