Appetite for Mezzanine Funding in Current Market

Posted on: March 28th, 2013

Mezzanine Funding Mezzanine lenders have a strong appetite to put out new loans in the current market. A lot of mezzanine lenders have raised new funds and are open for new loans.

Many companies need capital to fund growth. Given the low interest rate environment, most companies want low interest rate loans – 4% to 5%.

Unless a company has solid assets to lend against, they will not get a low interest rate loan from a bank. Yet, the interest rate on mezzanine loan of 12% scares them, as it appears unaffordable.

This creates a gap – mezzanine lenders wanting to make loans but business owners scared to take them because of the price. Attract Capital to the mezzanine funding rescue!

Mezzanine loans are more expensive than bank loans but they are much more beneficial than bank loans. Mezzanine loans are against cash flow, not assets, so you will get more money than a bank loan.

Also, the principal repayment for mezzanine loans does not start right away – it is delayed two to three years to give the company the ability to use the extra cash. So you can do MUCH BIGGER things with mezzanine funding, leading to much more dramatic growth.

Looking to buy your competitor, mezzanine funding can fund that. Looking to build your cash reserves to spend more money on new products and marketing, mezzanine funding can fund that as well.

Have we whetted your appetite for mezzanine funding? We hope so!

During their underwriting processes, acquisition financing providers analyze probable performance projections for their proposed borrowers. The underwriter often toggles between a few scenarios to sensitize the growth variables leading to slower revenue and margin growth over time. The lender’s underwriting view is usually an extension of its credit intelligence and historical experience.

Mezzanine debt loans occupy the risky echelon beneath the bank but ahead of the equity in a capital structure. They are naturally subordinated to the bank loan via an intercreditor agreement wherein the senior lender retains the power to block their interest or force them to standstill.

In the middle market, acquisition financing providers are regarded as super intelligent and hardworking. They have distinguished themselves at elite banks or consulting firms and possess the ability to synthesize voluminous levels of info into a coherent, succinct takeaway or observation. This skill is extremely valuable in attributing causation to business drivers in a financial model used to foretell the future.