Module: General Practice
Q180: Which of the following is NOT a characteristic of "Quasi-Equity" (or Hybrid Capital) instruments often used in SME financing?
✅ Correct Answer: B
Quasi-Equity sits between debt and equity in the capital structure.
Option B is the exception because Quasi-equity is unsecured or subordinate.
It does not hold a "First Charge" superior to senior debt.
In the event of liquidation, senior lenders (banks) are paid first, and quasi-equity holders are paid second.
The purpose of this instrument is to allow SMEs to raise funds without diluting ownership immediately (like equity) while offering flexible repayment terms (unlike rigid bank loans). Examples include Convertible Debentures and Mezzanine Debt.
Option B is the exception because Quasi-equity is unsecured or subordinate.
It does not hold a "First Charge" superior to senior debt.
In the event of liquidation, senior lenders (banks) are paid first, and quasi-equity holders are paid second.
The purpose of this instrument is to allow SMEs to raise funds without diluting ownership immediately (like equity) while offering flexible repayment terms (unlike rigid bank loans). Examples include Convertible Debentures and Mezzanine Debt.