Waterfall Payment
Categories: Banking
Just like a junior high lunchroom, there’s a hierarchy in any corporate lending structure. A company with multiple lenders will have both senior and subordinated debt. If there’s ever a lack of funds, senior lenders get first crack at the money. They get paid, then subordinate debt has its turn.
A waterfall payment means the senior lender gets paid back completely before subordinate lenders get dollar one. Like a waterfall going over a cliff...people near the top get soaked first, before the water even reaches the people below.