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Priority Between Multiple Lenders

Priority Between Multiple Lenders

If you are borrowing from more than one lender, the lenders may agree amongst themselves the priority of their borrowings: Namely, who will get first bite at any loan security and who gets repaid first if your business runs into trouble and you default on your debts. This arrangement will be formalised between them by means of a deed of priority.

Normally loans from shareholders (including venture capitalists) will rank behind the loan security upon which your bank is relying. If you want particular loans repaid before bank borrowings you may need to agree the position with the bank.

You need to be aware of, and observe, the repayment priorities as you may have to repay debtor interest in a particular order.

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