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In this tutorial, Todd Alt explains the concept of a subordination agreement, a key financial instrument used by creditors. This agreement is essential for senior creditors when allowing a company to borrow more money, as it ensures that new lenders acknowledge the existing loan prioritized ahead of them. Subordination agreements clarify the order of payment in case of liquidation or bankruptcy, indicating who has claims on specific assets. Understanding these agreements is crucial for lenders to comprehend their position in the capital structure. Overall, subordination agreements help delineate creditor hierarchy and payment rights in financial transactions.