stockholder's equity in a corporation, plus subordinated debt, such as debentures or loans to the firm by an owner. Credit analysts sometimes count loans by a principal toward a company's worth, provided the principal owners sign a subordination agreement assuring that bank loans are paid first. This is especially true of closely held corporations where officers and owners are often the same.
net worth plus subordinated debt, as viewed by senior creditors.
net worth plus subordinated debt, as viewed by senior creditors. In small business banking, loans payable to principals are commonly subordinated to bank loans. The loans for principals thus can be regarded as effective net worth as long as a bank loan is outstanding and the subordination agreement is in effect.
