Banks will take an extremely cautious approach as to how they allocate their precious tier one capital. As a result, we think that bank lending activity is likely to fall off a cliff. Much like economic activity pulled back significantly after 9/11, the same process is underway. Bank senior management’s are clearly rattled and fighting for their survival so they will be very reluctant to take on new risk. This is bad news for the general economy as good companies that need capital will have to be more innovative and work harder to find it. There are still plenty of sources of capital out there but they are non traditional sources such as mezzanine funds, non-bank finance companies and hedge funds.

Hopefully, they can do their part and help fill the inevitable bank lending void.

One of my scarier observations about this week’s events is the politicizing of the financial crisis. Both candidates are doing their fair share of using the disaster to further their own candidacies. There are a large number of reasons for this financial crisis. I for one am not bright enough to boil it down to one simple reason in political sound byte fashion. When this happens and politicians believe that they can fix a very complex problem with lots of new regulation, one thing is for sure – you get more regulation than needed and a lot of it is useless.

One thing is for sure, Paulson seems to be doing a great job of dealing with these extraordinary events. Some of these companies are more important than others and the circumstances surrounding their demise are different. This calls for the need to have a flexible approach to solving these massive problems.

Attract Capital has taken mezzanine debt in a new direction through using it as growth capital in a two layered structure. This is done without the participation of an equity investor and results in significantly less equity dilution for the owner. In many instances, mezzanine debt can be raised with an equity warrant give up of less than 10% vs. a 50%+ give-up to an equity investor.

As the mezzanine market grows larger and more efficient, mezzanine firms are increasingly seeking these types of financing structures. As long as the deal is properly structured and presented, growth mezzanine is a viable funding option for most companies. Likely candidates are growth minded companies seeking acquisition capital or capital to support faster internal growth. To learn more about we achieve this for our clients- please refer our 5-step Capital Funding System.