Advanced English Dialogue for Business – Equity kicker

Listen to a Business English Dialogue about Equity kicker

Austin: Hi Mia, have you heard of the term “equity kicker” in business and finance?

Mia: No, I haven’t. What does it mean?

Austin: An equity kicker is a form of additional compensation or benefit given to lenders or investors in addition to the principal and interest payments, typically in the form of equity in the borrower’s company.

Mia: Oh, I see. So, it’s a way to incentivize lenders or investors to take on additional risk by providing them with potential ownership in the company.

Austin: Exactly. Equity kickers are commonly used in financing arrangements, such as mezzanine financing or venture capital investments, to align the interests of lenders or investors with those of the company’s owners.

Mia: Are there different types of equity kickers?

Austin: Yes, there are. Common types include warrants, options, or convertible securities that give lenders or investors the right to purchase shares of the company’s stock at a predetermined price.

Mia: I see. So, equity kickers provide lenders or investors with the opportunity to benefit from the company’s future growth and success.

Austin: Yes, that’s correct. They serve as a way to share the upside potential of the investment in addition to receiving regular interest or dividend payments.

Mia: Are there any risks associated with equity kickers?

Austin: Yes, there are. Lenders or investors may not see a return on their investment if the company fails to grow or achieve its financial goals, and there’s the risk of dilution if additional shares are issued.

Mia: I see. So, it’s important for lenders or investors to carefully evaluate the potential risks and rewards of accepting an equity kicker.

Austin: Absolutely. It’s essential for all parties involved to understand the terms and implications of the equity kicker before entering into any financing arrangement.

Mia: Thanks for explaining equity kickers, Austin.

Austin: You’re welcome, Mia. If you have any more questions, feel free to ask!