Equity kicker

An equity kicker is a lending arrangement in which the lender agrees to provide a reduced interest rate in exchange for an ownership position in the borrower. The concept can also apply to warrants that are attached to a bond issuance, giving investors the right to buy a certain number of the common shares of the issuer at a fixed price. These arrangements are designed to make it easier for a business to secure funds through borrowing arrangements. Equity kickers are especially common for startup companies that would otherwise have a difficult time attracting financing.

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Corporate Finance