Equity, debt, quasi-equity: choosing the instrument

Quasi-equity covers financing that is legally debt but that a bank treats almost as equity, because it is repaid after the bank: subordinated loans, convertibles, mezzanine. It costs more than a bank loan, does not dilute you, and sits between the two. Choosing the instrument comes before choosing the fund.

I say this up front because most owner-managers I meet do it the other way round. They book a meeting with an invest (a Walloon regional investment company), discover in the room that it offers three or four instruments, and leave without knowing which one to ask for. I wanted to know who, in Wallonia and Brussels, publishes what. I went through the pages of nine funders on 15.10.2026. Here is what I found, and what it means for the share of your company you keep.

Three families, ranked by repayment order

Financing is ranked by the order in which it gets repaid if the company runs into trouble. The further down the ranking, the more risk the funder takes. And the more it wants to be paid.

The table boils down to one idea. The bank is paid first, the shareholder last, and quasi-equity slots in between. Everything else, cost, collateral, board seats, follows from that rank.

What is quasi-equity, in practice?

It is a loan with a clause that puts it behind the others. The lender agrees, by contract, to be repaid after the so-called senior creditors, the bank first. It takes no shares. It does not vote at the general meeting. But if things go wrong, it absorbs losses before the bank does.

That position is why a bank looks at it differently from an ordinary loan. During my eight years in the business lending department of a bank in Namur, from 2009 to 2017, I systematically restated a subordinated loan in the balance-sheet analysis: legally a debt, economically a cushion that protected our own loan. That is where the term "quasi-equity" comes from. It does not appear as such on a published balance sheet. It is an analyst's restatement.

Four forms come up in published terms:

• the subordinated loan, at a fixed rate or with a variable component;
• the convertible loan, which can turn into shares, often at the next round;
• mezzanine, a more expensive subordinated instrument with access to equity, common in debt-financed buyouts;
• the participating loan, where part of the return depends on results.

These labels overlap. One funder calls "subordinated" what another calls "mezzanine". What matters is the contract: rank, return, term, conversion.

Who publishes what: the check of 15.10.2026

For each player, I took the ticket size and instruments as it publishes them on its own website. Where I found nothing, I wrote "not published". I filled nothing in from memory.

Three findings, with numbers.

Five funders out of nine publish a ticket size. The other four, Sambrinvest, Noshaq, IMBC and Wallonie Entreprendre (the Walloon Region's public financing arm), give none on the pages I read. You will learn their range in a meeting, not before.

Only four explicitly name a quasi-equity product: ORSA, Namur Invest, Invest.BW and Sambrinvest. Noshaq, Wallonie Entreprendre and finance&invest.brussels publish "loans" without stating their rank, and IMBC details no instrument at all. Theodorus, a seed fund linked to the ULB (Université libre de Bruxelles), does equity only. That makes sense for a spin-off with no cash flow yet, and it is a useful negative fact: there is no point asking it for a subordinated loan.

The third finding surprised me. Namur Invest publishes the split of its portfolio: about 20% equity and 80% debt. People picture an invest as a shareholder. This one lends first. It also says it steps in three to four times per company on average, which means a first subordinated loan often opens the door to further rounds, in other forms.

When should you pick equity over debt?

When the project does not pay back fast enough. That is the only real question.

A loan is repaid on a schedule, whether the project works or not. A production line ordered in January is not running at full capacity in February. In between, the company pays the instalments out of the cash generated by its existing business. If that cash falls short, the debt becomes a problem, whatever its rate.

Equity is not repaid. The investor is paid out of the value created, through dividends or when it sells its stake. That is more expensive in the long run if everything goes well. It is far less dangerous if the project runs six months late.

The signals that, in the files I have seen, pushed towards equity rather than debt:

• a project with no cash flow for twelve to eighteen months (new site, new market, product development);
• a balance sheet already loaded, where the bank considers that equity can carry no more debt;
• a risk the bank refuses on principle, such as an unproven technology;
• the wish for a partner on the board who helps structure growth, with the price that comes with it.

That price can be calculated. Take a €1M equity injection. The stake you give up depends on the valuation before the money comes in, the pre-money valuation. Simple formula: investment divided by (pre-money + investment).

The valuations are calculation assumptions, not market terms. The same million as a subordinated loan costs you no shares. As a percentage, that is 0% dilution against 10 to 25% here. But it carries interest and must be repaid at maturity. The valuation method itself is negotiable: I cover it in how to value an unlisted SME.

Quasi-equity in the middle: rank, cost, maturity

Quasi-equity does not dilute and it strengthens the balance sheet. It costs more than a bank loan and it has to be repaid. Those four properties explain nearly every deal where I have seen it used.

Its most underrated effect is indirect. Because it absorbs losses before the bank, it lets the bank lend more alongside it. Sambrinvest describes its subordinated loans as having a "financial leverage effect" with bankers, on its financing solutions page. Invest.BW puts it another way: it never finances the whole of a need on its own and steps in alongside other investors or the bank, as its partnership page states.

The best-documented case in my check is the Smart Bond from ORSA, formerly Investsud. As published:

• subordinated loan of €500,000 to €2.5M, over 5 to 10 years, with no dilution;
• a minimum annual interest, paid every year;
• a variable component based on performance indicators, typically EBITDA, paid at maturity with the principal;
• at maturity: repayment, rescheduling if the situation warrants it, or conversion into equity by mutual agreement;
• for Walloon SMEs with positive EBITDA and recurring cash flows.

The logic holds up. If the company performs, the lender earns more. If it has a bad year, the variable part shrinks. The minimum rate is not published on the pages I read, and I am not going to guess it.

Which hybrid instruments exist?

The four forms listed above come in different flavours depending on the funder. Here is how they read in published terms, and who they suit.

The plain subordinated loan

Fixed rate, term often longer than an investment loan, repayment amortising or in one go at maturity (bullet). Namur Invest, Invest.BW and Sambrinvest publish one. It is the instrument of the profitable SME that does not want a partner. I take it apart in the article on subordinated loans.

The convertible loan

It turns into shares on a decision or a set event, often the next round, sometimes at a discount. It is mostly used when a valuation is hard to pin down today. Namur Invest, Invest.BW and Sambrinvest list it. Read the conversion formula before signing: it sets the stake you will give up tomorrow.

Mezzanine

Subordinated, more expensive, often with access to equity. You mostly come across it in debt-financed buyouts. Invest.BW publishes it under that name.

Participating loans and variable returns

Part of the return follows results. Sambrinvest publishes participating loans, ORSA a subordinated loan with a variable component. Both ease the burden in bad years.

Wallonia, Brussels, Flanders: public funding takes different shapes

The answer depends on where your registered office is. In Wallonia, the offer has two tiers. Wallonie Entreprendre publishes a portfolio valued at €4.1bn, of which €1bn is invested in the provincial invests. Those invests, Namur Invest, Invest.BW, Sambrinvest, Noshaq, IMBC, finance local SMEs, often with quasi-equity. Namur Invest, for instance, is 60% privately owned and 40% owned by the Region via Wallonie Entreprendre. Noshaq publishes €120M of investments approved per year on average over the last five years, without breaking out the subordinated share.

In Brussels, the public counterpart is finance&invest.brussels, the Brussels-Capital Region's financing arm. It publishes up to €5M for SMEs as co-investment, with loans, guarantees and equity stakes, plus a proxi loan through its brusoc subsidiary. On the page I read, it does not detail a product named as subordinated.

In Flanders, the public equivalent is PMV. This site focuses on Wallonia and Brussels, and I have not checked its terms, so I do not quote them.

In practice: an SME in Namur has a provincial invest that publishes its quasi-equity in detail. A Brussels SME will more often go through a loan-plus-guarantee package, or a private fund.

The right mix comes down to three numbers

No instrument is right in itself. The mix is decided with three numbers you already know, or that your accountant can pull out in an afternoon.

1. Your current EBITDA and how steady it is. Positive and recurring: quasi-equity is within reach. ORSA makes it a condition of its Smart Bond.
2. The time before the project generates cash. The longer it is, the smaller the debt share should be.
3. The share of the company you are willing to give up. Zero: debt and quasi-equity. Ten to twenty-five per cent: equity becomes an option again, and the dilution table above gives you the order of magnitude.

Reading shareholders' agreements, I have often seen the wrong mix: an SME giving up 30% of its capital for a project its EBITDA could have carried as a subordinated loan, because nobody had put that option on the table. The reverse happens too, an owner who borrows to the point of suffocation to avoid opening the capital.

For the head-to-head between bank loan and equity, with a worked €3M example, see bank debt or equity. To see who offers which instrument, with ticket and area, the ranking of investment funds for SMEs covers the nine players in this check. ORSA also explains the logic on its bank debt or equity page, and Namur Invest lists its formulas on its website.