Mezzanine debt is a superior form of capital replete with flexibility, patience, and situational versatility. It unlocks greater funding availability for companies in need of scale-up capital for transitional periods. Unlike more staid loans such as bank and asset-based loans which help fund day to day capital needs, mezzanine debt is like jet fuel in its ability to fund large growth steps, such as acquisitions and accelerated growth.
Acquisition loans are an important part of the middle market lending ecosystem. They provide a reliable way for companies to scale up through providing an accommodative loan structure conducive for strategic growth. Despite their standing in the upper echelon of corporate finance tools, most companies regard acquisition loans in a low value, utilitarian way as dollars at a price.
One-stop solutions for acquisition financing are an efficient and reliable approach to deal funding. This is especially true now during a period of banking stress with liquidity receding from the market. One stop acquisition financing involves sourcing all debt capital from one provider be it a unitranche provider or mezzanine debt lender.
Middle market business performance has been strong in the first quarter of 2023. Continued overperformance requires growth capital, which is bound to become tighter as the new banking crisis evolves into a new phase. The market is confronted with a loss of confidence in banks with strong financial ratios, and the no-confidence contagion appears to be spreading.
Mezzanine financing is a value-added form of lending available to middle market companies that helps them acquire and grow faster. It is provided by lenders who have evolved outside of the banking industry primarily as private lenders and private credit funds. The growth of the mezzanine financing sector is due both to the inherent attractiveness of the loan structures and the inability of banks to satisfy the middle market’s needs for this type of capital.