Mezzanine financing is poised to make a comeback as a lending alternative. Businesses are looking for funding and banks and private equity investors cannot provide the capital to every company or deal in need of funding. This need for funding helps mezzanine debt revival by giving mezzanine lenders a chance to lend to a large group of companies effectively dis-intermediated from the capital markets.
Mezzanine funding is a flexible form of lending, situated between senior bank loans and equity loans in a company’s capital structure. The need for funding helps mezzanine debt revival and many lenders are gearing up to a higher level mezzanine loan deployment in order to fill the funding gap.
High-Yield loans are harder to raise, which means companies must look to other means of borrowing. Banks are also closing the lending window to many good corporate borrowers due to their higher capital requirements. Economic growth coupled with tightening credit market conditions create the backdrop for a mezzanine debt revival.
With high-yield loans in a very questionable state, mezzanine loans are going to see a continued increase in desirability. SME’s specific need for funding helps mezzanine debt revival, because SMEs understand that mezzanine funding is the best option for their growth opportunity.
Companies need funding in order to grow their business. If a company has a solid business plan and good ownership, the only thing it needs is the capital to get it to where it wants to be. This need for funding helps mezzanine debt revival by giving mezzanine lenders a chance to make loans to companies that were not able to receive senior bank loans and large private equity investments.
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