Download or read book Waiting for Capital with On-Demand Financing written by Barney Hartman-Glaser and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a firm with infrequent access to capital markets, continuous access to costly intermediary financing, and a cost of holding cash. In the optimal renegotiation-proof contract, the intermediary absorbs a share of cash-flow risk. This share increases as firm depletes its internal cash, suggesting an overlapping pecking order. If the firm runs out of cash, it liquidates if the cash-flow is too risky, otherwise the intermediary extends financing that resembles either private equity or collateralized debt. The model helps explain trends in financial intermediation, such as the rise of private equity and the use of collateralized debt.