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Off-Balance-Sheet Financing
What does it mean?
A way of raising money that does not appear on the balance sheet.
In Other Words...
This is unlike loans, debt and equity, which do appear on the balance sheet. Examples of off balance sheet financing include joint ventures, research and development partnerships, and leases (rather than purchases of capital equipment).
This term came into household use during the Enron bankruptcy. Many of the energy traders' problems stemmed from setting up inappropriate off-balance sheet entities.
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Related Terms
Balance Sheet | Project Finance | SPV
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