Importance of Mezzanine Capital In Funding A Business
Looking for some extra money to fund a merger or acquisition? In need of some refinancing of some previous loans? Or are you simply just looking for some extra dollars to keep your company secure and make room for future growth? Mezzanine capital is a great solution that is both safe and effective.
Banks and private equity investors do not provide the necessary capital to every company or deal in need of financing. Mezzanine capital fills this funding gap. A mezzanine lender evaluates the company‚Äôs cash flow, potential growth and profitability. Companies that have stable financial performance, a strong plan for the future, and revenue greater than $20 million are prime targets for mezzanine capital.
Mezzanine lenders understand businesses are built on growth, innovation, and expansion. Therefore, mezzanine capital operate on a long-term basis. They are patient providers of financing, willing to wait for 5 years to collect the principal back. This long time period means a business can use mezzanine capital in funding the expansion of the business and generate increased cash flow. An increase in cash flow allows companies to further scale the company, resulting in a stronger and more valuable company. Mezzanine capital will unleash a continued cycle of development and fruition for the company.They take risk with their loan because it is unsecured by collateral.
A clear advantage of mezzanine capital is the flexibility it offers to both the borrower. It is beneficial for companies that cannot raise more senior debt. It is reasonably priced and is without excessive restrictions. In terms of spending the loan proceeds, it is up to your best business judgment as to how the financing should be applied. Mezzanine capital providers gauge the companies they lend to based on a subjective and objective analysis. When you put it together, it affords you the money, flexibility, and high quality people to help take your business to the next level.