Junior Lien Business Loan: Subordinated Financing for Growing Companies

A junior lien business loan provides the additional capital your company needs while working alongside your existing senior financing. This subordinated debt structure lets you access growth funding without refinancing your primary loan or disrupting your banking relationships.

Noble Funding has been a leader in junior lien business loans for over 20 years, helping companies across the nation access $300,000 to $10 million in subordinated financing. Our A+ BBB rating and zero complaints since 2005 demonstrate our commitment to structuring deals that work.

What Is a Junior Lien Business Loan?

A junior lien business loan is debt that is secured by a lien that ranks below, or \”junior to,\” an existing senior lien. In the debt hierarchy:

• Senior lien (first position): Has priority claim on collateral and gets paid first
• Junior lien (second position): Has subordinated claim and gets paid after senior debt is satisfied

This type of financing is also referred to as:

• Second lien debt
• Subordinated debt
• Second position financing
• Junior debt

The \”junior\” designation refers to the lien’s priority position, not the size or importance of the loan. Junior lien loans can provide significant capital, they simply have a lower priority than senior secured debt.

The trade-off is clear: junior lien lenders accept more risk in exchange for higher returns, which enables them to offer faster, more flexible financing.

Benefits of Junior Lien Business Loans

1. Access Capital Beyond Your Bank’s Limit

When your primary lender has extended all the credit they can offer, a junior lien loan fills the gap. You get additional capital without replacing your existing financing.

2. Preserve Valuable Banking Relationships

Your bank relationship remains intact. Banks typically support junior lien arrangements because their senior position stays protected.

3. Speed to Capital

Junior lien specialists like Noble Funding can fund in days. Traditional bank refinancing takes several weeks or usually months.

4. Flexible Use of Funds

Use junior lien proceeds for any business purpose:

• Working capital
• Acquisitions
• Equipment purchases
• Expansion projects
• Seasonal inventory
• Bridge financing

5. Complement Your Capital Structure

Junior lien debt adds a layer to your capital stack, giving you more financing options without equity dilution.

6. Potential for No Personal Guarantee

Specialized junior lien lenders may offer structures without true personal guarantees, protecting your personal assets.

Understanding Lien Priority and Subordination

What \”Subordination\” Really Means

When a junior lien lender subordinates to your senior lender, they agree to:

• Accept a lower priority position for repayment
• Allow the senior lender to be paid first from any collateral proceeds in case of default
• Not take enforcement actions that would harm the senior lender’s position

This subordination is typically documented in an intercreditor agreement or subordination agreement between the two lenders.

Why Senior Lenders Accept Junior Liens

Banks often welcome junior lien arrangements because:

• Their senior secured position remains protected
• The business gets needed capital without the bank taking additional risk
• It demonstrates the business can attract additional financing
• The junior debt may help the business grow, improving the senior lender’s position

Types of Subordination

Lien Subordination: The junior lender has a second position lien on collateral. If collateral is liquidated, the senior lender gets paid first.

Payment Subordination: The junior lender agrees not to receive principal payments while senior debt is outstanding or during certain conditions.

Most junior lien business loans involve lien subordination via an inter-creditor agreement, allowing both lenders to receive regular payments simultaneously.

Who Should Consider a Junior Lien Business Loan?

Companies with Existing Bank Financing

If you have a bank line of credit or term loan and need additional capital, a junior lien loan is ideal.

Businesses Approaching Growth Opportunities

When growth opportunities require more capital than your bank can provide, junior debt bridges the gap.

Acquisition-Focused Companies

Junior lien loans work well for acquisition financing, layering on top of senior debt to complete the capital stack.

Seasonal Businesses

Companies with cyclical revenue can use junior lien loans for working capital during peak preparation seasons.

Government Contractors

Contractors often need working capital for new contracts while their senior bank line supports ongoing operations.

Companies with Time-Sensitive Needs

When speed matters more than the lowest rate, junior lien financing provides capital in days instead of months.

Noble Funding: Junior Lien Loan Specialists

Noble Funding has spent over 20 years providing junior lien business loans to companies across the country. Here is what makes us different:

True Subordination

Our junior debt is fully subordinated to any bank or senior secured lender. We work with your existing financing structure.

Rapid Funding

We can provide $2 to $3 million in just 2-3 business days. When opportunity knocks, you need to answer quickly.

Significant Capital Available

Noble Funding offers junior lien loans from $300,000 to $10 million for companies with $5 million to $150 million in annual revenue.

Flexible Terms

Choose from 12, 15, or 18-month terms with six months of early payoff discounts.

No UCC Filing Option

We can structure deals without UCC filings on your corporate assets in some cases, maintaining maximum flexibility.

No Personal Guarantee Options

Qualified borrowers can access junior lien financing without putting personal assets at risk.

EBITDA Flexibility

Noble Funding works with companies that have positive or negative EBITDA. Current profitability is not the only criterion.

Proven Track Record

Over $1 billion funded with an A+ BBB rating and zero complaints since 2005.

Common Applications for Junior Lien Business Loans

Working Capital for Expansion

A logistics company with $30 million in revenue had maxed out their bank line at $4 million. They needed an additional $2 million for fleet expansion. Noble Funding’s junior lien loan provided the capital without disrupting their primary bank relationship.

Acquisition Funding

A healthcare services business wanted to acquire a smaller competitor for $5 million. Their bank covered $3 million in senior debt. Noble Funding provided $2 million in junior lien financing to complete the acquisition.

Bridge to Larger Facility

A manufacturing company was in process for a major refinance but needed $1.5 million immediately. Our junior lien loan bridged the gap until the larger facility closed.

Inventory Financing

A distribution company needed $3 million for inventory purchases before a major selling season. Their bank line was committed to accounts receivable. Junior lien financing covered the inventory need.

Contract Startup Capital

A federal contractor won a $10 million contract but needed working capital to ramp up operations. Their existing bank line supported ongoing business. Noble Funding’s junior lien loan funded the new contract startup and labor costs.

The Junior Lien Loan Process

Step 1: Initial Discussion

We learn about your business, existing financing, and capital needs. This helps us determine if junior lien financing is the right solution.

Step 2: Documentation Gathering

We review:

• Recent financial statements
• Existing loan agreements
• Accounts receivable and payable aging
• Bank statements
• Tax returns

Step 3: Term Sheet

Within 24-48 hours, we provide a term sheet outlining the proposed junior lien structure.

Step 4: Coordination with Senior Lender

We work with your bank to obtain any necessary consents and execute subordination agreements when required.

Step 5: Due Diligence and Closing

Our streamlined due diligence process leads to fast closing. Funding can occur in 2-3 business days.

Junior Lien Loan Costs and Considerations

Interest Rates

Junior lien loans typically carry higher interest rates than senior debt because the lender accepts more risk. Expect rates above bank loan rates.

Fees

Common fees include origination fees and closing costs. Understand all costs before committing.

Terms

Noble Funding offers 12, 15, or 18-month terms. Shorter terms mean faster repayment but higher monthly payments.

Early Payoff

Many junior lien funding providers, including Noble Funding, offer early payoff discounts. This provides flexibility if you want to retire the debt sooner.

Subordination Requirements

Your senior lender may need to approve the junior lien arrangement. Noble Funding helps handle these negotiations.

Frequently Asked Questions

What makes a lien \”junior\”?

A lien is junior when it has a lower priority than another lien on the same collateral. In case of liquidation, the senior lien holder is paid first.

Will my bank allow a junior lien loan?

Most banks accept junior lien arrangements because their senior position remains protected. Noble Funding coordinates with your bank when required to obtain any necessary consents.

How much can I borrow with a junior lien loan?

Noble Funding provides junior lien loans from $300,000 to $10 million. The amount depends on your revenue, financial situation, and capital needs.

Do junior lien loans require collateral?

Requirements vary. Noble Funding can structure deals with no UCC filings on corporate assets for qualified borrowers.

How fast can I get a junior lien loan?

Noble Funding can fund in 2-3 business days for qualified borrowers, significantly faster than traditional bank financing.

Can I have both senior and junior debt at the same time?

Yes, that is exactly how junior lien loans work. You maintain your senior debt while adding subordinated junior debt.

Get Started with a Junior Lien Business Loan

When you need capital beyond what your bank can provide, Noble Funding’s junior lien business loans offer the solution.

Why Noble Funding for your junior lien loan:

• 20 years of junior capital experience
• Over $1 billion funded nationwide
• A+ BBB rating with zero complaints
• Funding in days, not weeks
• $300,000 to $10 million available
• Fully subordinated to your existing lenders
• No personal guarantee options available

Contact Noble Funding today to discuss how a junior lien business loan can provide the capital you need while working alongside your current financing. Your growth should not be limited by your senior lender’s capacity.