DEBT ACCORDIONS

A loan provision which allows the borrower to add additional investors to the loan subsequent to the initial loan date. This provision helps the borrower if they are struggling to make payments, and in turn, helps the lender receive the full payments.

Debt accordions generally occur with regards to commercial loans. If the company is going through a rough patch, it is often in the shareholder's best interests to take on some of the debt liability, rather than see the company go bankrupt, leaving them with nothing. This is especially common if the debt is collateral debt, where the collateral is necessary to continue business operations.