What is a second lien term loan in a corporate stack?
It is secured corporate debt whose lien on the collateral ranks behind the first lien lender's, with the ranking set by an intercreditor agreement rather than by the security itself. This page concerns corporate credit; the same words describe home-equity lending, which shares nothing with it beyond the vocabulary.
The instrument's defining trade is security without priority. Unlike mezzanine, a second lien lender holds a claim on the assets; unlike the senior lender, it collects on that claim only after the first lien is satisfied. In a strong outcome the distinction never matters. In a weak one it is the whole economics, which is why the instrument prices between the layers it separates.
Second lien capacity exists mainly in the core middle market and above. At the smaller end of the market the junior layer is often too narrow to split into secured and unsecured tranches at all, and the practical alternatives are a unitranche or a single junior tranche.
What does second lien cost right now?
Second lien term debt prices at S+725 to 825 for borrowers with $15m to $40m of EBITDA (Lincoln International, Private Credit Snapshot, as of 1 May 2026). For scale: that sits roughly midway between senior non-bank debt at S+550 to 750 for smaller borrowers and blended junior capital at 13.00% to 16.00% all-in (SPP Capital Partners, Market At A Glance, July 2026), which is the position in the queue expressed as a price.
The coupon is not the whole cost here either. The intercreditor agreement governs standstills, payment blockages, and who controls an enforcement, and those terms vary more between deals than the pricing does. Two second lien facilities at identical spreads with different intercreditor terms are different instruments.
Second lien or mezzanine?
The distinction is security against subordination. A second lien lender holds a junior claim on the collateral; a mezzanine lender typically holds no lien and is subordinated by contract, compensated instead with a higher coupon, a payment-in-kind component, and usually a warrant. Second lien behaves like cheaper, tighter, secured money; mezzanine behaves like more expensive, more flexible, equity-adjacent money.
Which one fits is decided by the first lien documents and the business's cash profile. A senior facility with room for a second lien under its permitted-lien baskets, and a business that can pay a full cash coupon, points secured. A structure where the senior lender will not share collateral, or where cash needs protecting through a growth phase, points to mezzanine, which is covered on its own page.
When does a second lien beat refinancing the whole stack?
When the first lien is worth keeping. A senior facility priced in a better market, with covenants set to an older, friendlier convention, is an asset; refinancing the whole structure to add capacity reprices every dollar of it at today's terms. Layering a second lien behind it adds the incremental capital while the existing facility runs, at a higher rate on the smaller piece.
The arithmetic is the same shape as every layering decision: a high price on the increment against a repricing of the whole. It favours the second lien when the existing facility's economics are materially better than market and the incremental need is modest, and it favours a full refinancing when the incumbent terms are near market anyway or the maturity is close enough that the repricing is coming regardless.