What is a “Participatory Loan” and why is it so widely used in the entrepreneurial ecosystem?

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It is a medium-to-long-term financial instrument that features a mixed interest rate (a minimum fixed tranche and a variable tranche based on the company’s performance, such as net profit or turnover). Since it is treated accountably as net equity for the purposes of capital reduction due to losses (subordination), it improves the solvency of the SME’s balance sheet for third parties.

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