Loan terms with an accordion feature are well suited for situations where a business shows great potential for accelerated growth, while at the same time there are indications of risks from uncertainty due to factors for which the business has no control. Navigating Uncertainty: Accordion is committed to helping private equity sponsors and portfolio company CFOs assess and address financial risk. Company ABC has also purchased an "accordion feature" that lets it increase its total debt commitment of $100,000 to $150,000 because Company ABC believes it will need an additional $50,000 if it decides to add a new sales division. A technical default is a deficiency in a loan agreement that arises from a failure to uphold certain aspects of the loan terms other than the regularly scheduled payments. Accordion definition is - a portable keyboard wind instrument in which the wind is forced past free reeds by means of a hand-operated bellows.
See more. The offers that appear in this table are from partnerships from which Investopedia receives compensation. All the expectations are negotiated and a This term's origin is derived from how an accordion can be pulled and stretched in a manner that lengthens its total size. The graph below shows the composition of the accordion loan. Companies will often purchase an accordion agreement if they anticipate needing additional capital to fund expansion plans, for example. The red line shows the known loan balance outstanding for the 11 year period (the initial $500k draw for one year, followed by ten-year amortizing term loan). For example, suppose company ABC has established a $100,000 line of credit with the Bank of XYZ. adj. The accordion feature is an added option that requires the business to pay a premium for the right to use it. Debt is an amount of money borrowed by one party from another, often for making large purchases that they could not afford under normal circumstances. The blue line represents the accordion tranche - a multiple advance facility to accommodate construction advances. How to use accordion in a sentence. on (ə-kôr′dē-ən) n. A portable wind instrument with a small keyboard and free metal reeds that sound when air is forced past them by pleated bellows operated by the player.

By using Investopedia, you accept our Having folds or bends like the bellows of an accordion: accordion pleats; accordion blinds. Debt is an amount of money borrowed by one party from another, often for making large purchases that they could not afford under normal circumstances. An accordion feature is an option a company can obtain, giving it the right to increase a line of credit with a creditor. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Second, the terms for the entire line of credit, including all the incremental increases, are negotiated at the onset. Debt accordions are most often offered on commercial accounts.

A commercial and industrial (C&I) loan is a type of short-term loan made to a business or corporation, not an individual. Term out is a financial concept used to describe the transfer of debt internally, within a company's balance sheet. By making additional credit increases contingent on the business exceeding pro forma expectations, the lenders focus more on the opportunity than the risk. Loan syndication is the system of involving various lenders to fund specific portions of a loan for a single borrower. A lender is able to somewhat mitigate the risk of the noted uncertainty by increasing a line of credit incrementally, with each increment made contingent on the future realization by the business of specific predetermined expectations, and an increased certainty of the aforementioned uncontrollable factors. First, it allows the business to put forth more favorable terms for lenders. Debt Accordions: A loan provision which allows the borrower to add additional investors to the loan subsequent to the initial loan date. Each Accordion Facility Increase shall be in a minimum aggregate amount of at least $15,000,000 and in integral multiples $5,000,000 in excess thereof. Another important characteristic of the accordion feature that benefits the business is the credit increases are optional. An accordion feature is an option that a company can buy that gives it the right to increase its

Terms defined in the Facilities Agreement have the same meaning when used in this Uncommitted Accordion Facility Commitment Notice. Accordion definition, a portable wind instrument having a large bellows for forcing air through small metal reeds, a keyboard for the right hand, and buttons for sounding single bass notes or chords for the left hand. A debt accordion is a provision that allows a borrower to expand the maximum allowed on a credit line or add a Thus, if and when a credit increase takes place, all the terms are predetermined, and the credit increase can be expedited. Check out our latest framework and explore our purpose-built collaboration platform.