Middle market companies are always looking for a way to increase competitively within their market. It is impossible to stay in an ever changing and growing market without development and enhancements to operations. To increase your company’s scope and become a better company in the future, it is necessary to utilize capital to jump-start the process. Capital, however, is not the easiest thing to come by for companies sitting in the threshold of the middle market. For starters, a lot of companies are only able to run by utilizing its profits of one day in the next day’s operations.
This forces you and your company to look towards external sources. The initial thought of someone looking to obtain capital for business funding is to go to the bank. Banks are not a good source of capital to rely on if you are in the middle market because your company is simply too small for most banks to even spend time on.
They would not receive the amount of payback they are looking for. This is where mezzanine funding comes in. Mezzanine funding has been a rising star over the past few decades as a great option for middle market companies that are looking to advance. Mezzanine funding, a crossover between debt and equity financing, is a great option for middle market companies because the loans are relatively less expensive than giving up shares and the terms are flexible. This combination fits perfectly with the middle market company’s needs. Unlike bank loans, mezzanine finance does not look for hard assets as collateral.
The mezzanine lenders analyze cash flow and expect to be repaid through cash flow generated by the business expansion they are funding. Mezzanine finance is an arrangement that works for most middle market companies because it is a relationship-based. The mezzanine lenders want to get to know the owners and the management of the company and build up a trust in them. Whereas a bank just provides your company with a check, mezzanine financing is looking to grow with you in harmony over the long term. This makes mezzanine funding a good resource tool for expansionary middle market companies.
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