Loan Note investments are a popular means of investing in the UK’s alternative investment sector. Investors can purchase Loan Notes with an interest in investment areas, such as property.
Loan Notes are flexible for developers and provide security, and strong returns to investors. So are, increasingly attractive for both parties.
Here are some key terms used in the world of Loan Notes:
Issuer: The company that supplies the Loan Note.
Loan Note instrument: Documentation that sets out the Loan Note’s terms and conditions to the lender.
Coupon: The fixed rate of interest paid by the issuer of the Loan Note.
Coupon Terms: The terms on which the coupon is paid. Explains how the coupon is calculated and when it will be paid (monthly/quarterly/annually).
Loan Note Certificate: A little like a shares certificate, this provides evidence of ownership of the loan note.
Legal Charge: Essentially, how lenders enforce their rights to the property.
Debenture: A type of debt instrument backed by the creditworthiness and reputation of the issuer.
Exit: The point at which the issuer has paid all the outstanding interest and repaid the original capital.