Definition of Term out:
Term out is a financial concept used to describe the transfer of debt internally, within a company's balance sheet. This is done through the capitalization of short-term debt to long-term debt. Changing the classification of debt on the balance sheet allows companies to improve their working capital and take advantage of lower interest rates.
Internal transfer of existing debt on a companys balance sheet, through the capitalization of short and long term debt, without the acquisition of new debt.
Term out is the accounting practice of capitalizing short-term debt into long-term without acquiring any new debt. The ability for a company or lending institution to "term out" a loan is an important strategy for debt management and normally occurs in two situations.
Meaning of Term out & Term out Definition