Equity Kicker
Private Credit glossary · Loan Structures & Instruments
Definition
Warrant or equity-co-investment right attached to a debt instrument providing upside participation. In venture debt the kicker is typically a warrant for 0.25–2.0% of the borrower's fully diluted equity, struck at the most-recent-round price; in mezzanine deals it takes the form of warrants or co-investment rights that lift the all-in IRR roughly 200–400 bps above the headline coupon.
Equity Kicker in plain English
An equity kicker is a little bonus attached to a loan that lets the lender share in the company's success, not just collect interest. Normally a lender only earns a fixed rate; a kicker adds the right to buy a small slice of the company's stock later at today's price (a "warrant") — so if the business booms, the lender pockets extra gains on top. It's like lending a friend money for a food truck and, as a thank-you, getting the option to own 1% of it: if the truck becomes a hit, that 1% could be worth far more than the interest. Lenders use it to earn a higher true return on riskier deals where plain interest wouldn't be enough reward.
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