Glossary

A Preferential Transfer, also known as a Preference, is a transfer from the debtor to the creditor before a bankruptcy filing (and during the Preference Period) to the exclusion or detriment of other creditors.

A Prepaid Expense is an asset on the Balance Sheet as a result of a company making payments on goods/services to be received in the near future. 

An agreed-upon amount paid to the lender if the borrower pays all or a portion of its loan prior to the contract maturity.  If there is a prepayment fee, it typically is highest in Year 1 and steps down in following years.

The prime rate is the interest rate that commercial banks charge their most credit-worthy customers.

A Priming Lien has Priority Rights over a senior secured lien and thus should be reserved for on the borrowing base.

Priority Rights are used to determine which creditor has the senior claim to receive payment from a borrower or from the liquidation of certain of borrower’s property. Priority is generally determined by time of filing and perfection of a security interest in the property in question.

A Private Equity Group, PEG or Sponsor, invests equity (and sometimes debt) into companies with hopes to improve the business, or merge it with a similar business and eventually sell the it at a higher price.

A Pro Forma financial statement is one based on certain assumptions and projections. They are often used when a company is considering making a major change, such as a new loan or an acquisition.