INVESTING GLOSSARY
Pref Equity
Preferred Equity
Equity with negotiated priority for distributions or returns over common equity.
What does Pref Equity mean?
Equity with negotiated priority for distributions or returns over common equity. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Pref Equity in context
A preferred investor receives its agreed return before common equity distributions.
Why it matters in financing
Pref Equity can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related investing terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.