Shareholder Loan - Applications

Applications

• This form of financing is quite common while funding young companies with positive cash flows because such firms are still not able to raise debt from banks but need debt anyway to create a tax shield.
• The contribution of shareholder loans to a corporation's capital structure generally relieves the corporation's debt load and is therefore used in Leveraged buyout (LBOs) to manage a degree of leverage.
• Shareholders can extend the loan in distressed or near-default situations to save the company.