A business that brings in an annual turnover from £500,000 to £10,000,000 is known as an SME. SMEs are an important cog in the economy as they are very instrumental in creating new jobs. These SMEs have great potential to expand and grow at high speed, also provide new jobs.
The challenge with SMEs is the difficulty of obtaining financing to help spur fast growth. How mezzanine finance can help SMEs is by bringing these small and medium sized companies the financing needed for growth, without compromising the vision of the entrepreneur.
Private equity investor generally require a large ownership stake. Angel investors generally look to put capital into start-ups. Banks will generally not be able to provide meaningful growth capital to SMEs, due to their small size and limited assets. Mezzanine finance becomes the next logical option.
Mezzanine funding provides loans that sit between bank debt and equity. How mezzanine finance can help SMEs is by providing small and medium sized businesses with an injection of capital that gives them what they need to grow, without diluting the owner’s shares.
Mezzanine lenders do not make loans and expect to be granted part ownership in their borrower. Flexibility is another way how mezzanine finance can help SMEs. Mezzanine financing is a flexible lending option that will benefit the company through offering bespoke terms and structures.
How mezzanine finance can help SMEs is by giving the companies the money they need to grow. If SMEs continue to grow, more jobs will blossom and the economy will begin to flourish as a byproduct of mezzanine financing of SMEs.