Have a Viable Growth Plan for Your UK Firm? Take the Next Step with Mezzanine Financing!

Posted on: April 13th, 2017

Growth equity and venture capitalAre you a mid-cap company with an annual turnover of between £5 million and £15 million? Are you seeking a financing option that enables you to retain control of your business while not giving up valuable equity? Do you have a viable growth plan but yet finding it difficult to access flexible financing options?

Businesses that fall in the above category often find it extremely difficult to obtain the funding they require. This is because private equity investors are often only interested in controlling position, while angel investors and venture capitalists are more actively involved in start-ups. Additionally, conventional bank lending is mostly available against collateral and not generally awarded for companies that have strong cash flow. In such cases, mezzanine finance becomes a viable alternative in situations where bank finance is unavailable or when the present owners are unwilling to see their own share holdings in the business diluted by new equity investors.

Why Mezzanine Financing could be the answer you are looking for?

Mezzanine finance, which occupies a place between traditional bank debt and equity, can be the answer you are looking for. It combines elements of debt financing and equity investment and can prove to be relatively inexpensive when compared to private equity funding.

Moreover, mezzanine debt instruments can offer mid cap companies several specific advantages, including

  1. Providing a much cheaper option when compared to private equity, as the cost of capital usually lies somewhere between the low to mid-teens in percentage terms.
  2. More cash flow friendly. Bank loans, which require regular repayments, either monthly or quarterly, can drain the cash that is available to the business. Mezzanine financing, on the other hand, is typically structured with flexible payments, with the bulk of the money repayable towards the end of the loan agreement.
  3. A much smaller percentage on equity. Compared to a conventional VC or angel investor, mezzanine lenders take a much smaller percentage, which is an attractive prospect for many mid-caps, as they don’t have to give up their decision making rights.

A useful source of growth capital

Companies seeking to fund acquisitions, management buyouts or expansion plans, will find mezzanine finance to be a useful source of growth capital. Mezzanine providers being more comfortable with risk are open to funding strategies such as acquisitions and buyouts.  Mezzanine financing can also be a very effective tool in aiding sales development, launching a new product line, expanding a service network and funding other growth strategies.

Don’t let the lack of financial options stop your growth plans. Take the next step towards growth with mezzanine financing.

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