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Definition
A payment waterfall is the contractually agreed sequence in which available cash is applied — typically fees and costs, then senior debt, then subordinated debt, and finally equity.
In plain terms
It is the pecking order for cash. Each tier is paid in full before the next receives anything, which is why senior lenders accept lower rates.
Why it matters for your company
Where a facility sits in the waterfall drives its rate and risk. In distress, the waterfall mirrors the insolvency priority of payments. See intercreditor agreements.
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