Mezzanine Financing as a Middle Market Vehicle

A vehicle is something that can get you from point A to point B in a certain amount of time. Some vehicles move faster than others. Some vehicles have special features that others might not. That is what is great about Mezzanine Financing; it combines it all into one easy-to-use, safe, and dependable funding option.

Mezzanine Financing is like an economy and luxury automobile all in one. Mezzanine is a package made up of both subordinated debt and preferred equity. Unlike a bank loan, mezzanine financing relies upon a business’ profitability and growth potential. Mezzanine also has the heated seats and extra cup holder that you had always been looking for. It is unsecured and commands a longer term than senior debt. On a company’s capital structure, mezzanine financing is slated between common equity and senior debt. However, unlike senior debt, mezzanine is not in a first lien position against the company’s assets and it is rarely collateralized.

The benefits of mezzanine are also all of its safety features, just like an economy car. If a company has strong future cash flow, the loan will easily be repaid on time. Even if you miss your budget for a year or two, mezzanine will defer principal repayment and extend out the repayment maturity.

Mezzanine lenders receive their returns on investment primarily through interest rates and secondarily through upside on their warrants. Loans are often long-term with 5 to 7 year maturity dates. Mezzanine can be used for acquisitions, buyouts, growth, and for refinancing debt that the company already has. No matter how you want to use mezzanine funding, it will always provide great value money for a business. There is no personal guarantee and the principal repayment is deferred for several years. Take your first test drive with a mezzanine loan today.

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