What type of financing is characterized as ranking behind the primary secured lender?

The type of financing that ranks behind the primary secured lender is known as subordinate financing. This financing is essentially a secondary loan in relation to other loans secured against the same property. When a borrower defaults, the primary lender is first in line to be repaid from the proceeds of any foreclosure or sale, while subordinate or second-position lenders will only be paid after the primary lender's claims have been settled.

Subordinate financing is often employed in real estate transactions to help borrowers acquire additional capital while leveraging their existing equity or improving cash flow. This type of financing usually comes with a higher risk for the lender, as they will recover their investment only after the primary lender has been fully compensated, which can lead to higher interest rates compared to primary secured debt.

Other forms of financing, such as junior financing, share similar characteristics, but subordinate is more commonly the terminology used in the context of ranking in relation to secured loans. The term secondary is also descriptive of financing but is not traditionally used to denote the ranking of debt in this way. Private financing refers to funds sourced from individuals or private entities rather than institutional lenders, and it may not necessarily represent a subordinate position. Thus, subordinate financing is the most accurate answer regarding ranking behind a primary secured lender.