Due to the way the market has evolved in recent years, mezzanine financing has become a great option for companies looking to get financing. Banks have strayed away from giving loans to middle market companies, which has allowed mezzanine lenders to take the lead in providing capital directly to private companies in the middle market. There are several key benefits of mezzanine financing for middle market companies.
Mezzanine financing provides capital for growth, acquisition, and liquidity. Mezzanine financing is cost-efficient and helps provide the capital necessary for middle market companies to expand their business. Mezzanine capital is cheaper than equity financing and it also provides flexible loan terms, which makes it a superior option for smaller companies. Another one of the key benefits of mezzanine financing for middle market companies is the providing of cash out liquidity to middle market business owners.
Mezzanine lenders, unlike banks, will provide a loan to fund a large dividend to the business owner. This is a great way for an owner to realize liquidity without suffering any share dilution from an investor. Another key benefit of mezzanine financing for middle market companies is acquisition financing. Acquisition financing allows a company to purchase a business at a cash flow valuation level. When utilizing mezzanine financing to fund an acquisition, you can significantly increase the size and the profitability of your business. Long term, the key benefits of mezzanine financing for middle market companies centers about building a more valuable company. With long term patient mezzanine financing, you can build a bigger, more diverse and more valuable company.