Subordinated loans

If you want to strengthen your company’s net worth and improve your solidity in order to finance your growth plans. Your flexible alternative to a new investor.


/ What are Subordinated loans?

If it is difficult to aqcuire additional financing because your company's equity is insufficient, a Subordinated loan could be the solution. 

A Subordinated loan is something between borrowed capital and owners' equity, and can help increase your company’s solidity. The loan is subordinated all other loans and debts and is therefore equivalent to equity on the company’s balance sheet.

Subordinated loans in brief

  • A Subordinated loans is equivalent to owners' equity on the company’s balance sheet.
  • Subordinated loans have subordinate status in relation to other debt and do not require collateral.
  • The accumulated interest rate is established individually, but is, typically, approximately 9-15 pct.
  • The minimum amount of the loan is DKK 2 million and it must be part of a complete financing solution that includes financing from banks or other lenders.
  • Robust and healthy companies in all industries can apply for a Subordinated loan.
  • Subordinated loans are granted directly to the company.
Flexibility

With the option of either whole or partial deferred amortization along with a flexible settlement, we can customize a Subordinated loan to match your company's needs - and the bank's risk.

No collateral needed
Contrary to a regular bank loan, a Subordinated loan does not require collateral. However, the accumulated interest rate will be higher. The risk of Subordinated loans is the same as for owners' equity. 

/ Who can apply?

We consider the following criteria, when granting Subordinated loans:

  • The company's latest annual reports must indicate favorable tendencies
  • The company must, generally, have realistic development plans and growth ambitions
  • Both earning capacity and cash flow generation must be sufficient in terms of being able to settle a Subordinated loan
  • The management and the board of directors must possess relevant competencies
  • As a general rule, the company must have a turnover and sheet balance of minimum DKK 20 million
  • The company's solidity must be at least 10 pct. (preferably 25 pct. or more after aqcuiring the Subordinated loan
  • The company's present equity must at least match the size of the Subordinated loan
  • The Subordinated loan must be part of a combined financing solution and can help you get access to additional financing, typically from a financing institute, of the same amount or more
  • The company can only apply for a Subordinated loan of DKK 2 million or more.

Moreover, the company should fit the category of small and medium-sized enterprises, which means:

  • a maximum of 250 employees
  • A maximum turnover of DKK 372 million and a balance sheet total of DKK 320 million.
  • Independent of larger enterprises.

/ Price

A Subordinated loan is associated with a higher risk for The Danish Growth Fund. In turn, the requirements for the interest rate will be higher. The circumstances regarding Subordinated loans should be considered similar to those of equity financing.


Terms and conditions
The interest rate of a Subordinated loan consists of CIBOR 3 plus a fixed interest margin, which is applicable throughout the term of the loan. In addition to that, a part of the added value in the loan period will be included if the company is sold.

The general interest rate and settlement terms for a Subordinated loan are as follows:

  • The loan matures within 5-10 years with two years exemption, in principle, from repayment in the beginning along with compounding interest
  • The interest rate is set individually and is, typically, approximately 9-15 pct.
  • The interest rate is steady throughout the loan period on the basis of Cibor 3 + addition
  • Initial charge of DKK 40,000 + 1 pct. of the loan amount
  • If the company is sold within the maturity period, The Danish Growth Fund is entitled to an agreed exit bonus
  • The loan is irredeemable by The Danish Growth Fund

Calculate your interest and repayments
Use the spreadsheet to calculate your interest and repayments on a Subordinated loan. Please notice, all numbers are for guidance only. The spreadsheet is in Danish.

Download spreadsheet (in danish)

a fixed interest margin, which is applicable throughout the term of the loan

/ Process

The entire process usually takes between 5-8 weeks and consists of three steps:

  1. Preliminary evaluation, where we i.a. review the company's past three annual reports, a budget follow-up for the current fiscal year, a business plan and a financial plan. On the basis of the given material we decide if it is relevant to continue the process and schedule a meeting.
  2. A meeting with you, where we review your business plan further as well as the loan terms. If we can agree that a Subordinated loan is the right solution, we will formulate the credit agreement and possibly other agreements and conditions.
  3. Lastly, we look further into your business to gain insight into relevant commercial, justical and financial circumstances of the company. The Danish Growth Fund will then provide a list of the material needed to complete the inquiry.