Raising Mezzanine Debt through Mezzanine Lenders

Posted on: February 25th, 2015

wisdom of dollar

For medium sized business, mezzanine debt is often the surest and safest way for pursuing acquisitions. With the reduction of senior bank credit, mezzanine loans conveniently fill the gap by providing the required capital, without taking on a controlling stake as with equity financing.

Mezzanine is a middle ground solution that gives you more funding than a bank at a fraction of the cost of bringing in an investor. Mezzanine debt is usually acquired from mezzanine lenders who are independent funds who make loans to companies that fit their criteria. For a mezzanine lender the debt instrument provides a stream of income and some downside protection, while the warrant feature offers the potential for upside gains.

Most mezzanine lenders have specific lending criteria that determine the financial focus, the size of the loan, and the industries focused upon.

The role of financial advisory firm in raising mezzanine debt

The smartest and best way to bring in mezzanine debt is to approach a well regardedfinancial advisory firm that provides mezzanine funding solutions. These firms are often a gateway to the mezzanine lender community.

A good firm will give you structuring advice, presentation advice and connect your with a large number of reputable lenders. The firm will leverage its reputation to get your deal in front of the right mezzanine lenders.

Please call us. We can help provide quick sourcing solutions for your mezzanine debt financing needs.

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.

The deal world thrives on the belief that the institution providing acquisition financing will deliver on their promise. Lenders usually telegraph their capital capabilities early on during the sales pitch and give their deal sizes and hold levels for their fund.

Most mezzanine debt borrowers are rightly focused on the downside of breaking a covenant and for good reason. Most borrowers have had to deal with overly sensitive banks in the past which often exhibit trigger happy default notices during covenant breakages, especially when they want to get out of a loan.