The Ultimate End Zone Play: Touch-down with Mezzanine

Posted on: December 2nd, 2015

Touch down with Mezzanine

Some of the biggest plays in football are made in the Red Zone. A business is much like a football team.

“How can I beat the competition to the End Zone?” While not well known, mezzanine loans are the play schemes that can drive the growth of your business downfield and score that touchdown.

It’s 1st and Goal and your team is looking for you to make the big play. A mezzanine loan allows you, the quarterback of your team, to stay on the field and make the game-winning play.

The lender empowers you to be the general manager, quarterback, and coach.

This means you can keep your team intact, be in charge, and make the decisions of how the company, or the team, will be run. A private equity investor may still allow you to be the quarterback.

However, he may take control of the company, the team, and the board, and make his own decisions regarding what play schemes the company should run.A bank loan will let you get first downs and move the chains, but cannot notch you a score.

With a mezzanine lender the ball is in your hands. You, your team, and your business, can score that touchdown the way you want. You can pay off other loans or liabilities or fund new product or new market expansion, business expansion, business acquisition, dividend or bonus to the owner.

Mezzanine loans provide great value for money to a business. There is no personal guarantee and the principal repayment is deferred for several years.

Having the ability to be “The Guy” is what you need in business. It’s time for you to score with mezzanine lending.

Mezzanine debt loans occupy the risky echelon beneath the bank but ahead of the equity in a capital structure. They are naturally subordinated to the bank loan via an intercreditor agreement wherein the senior lender retains the power to block their interest or force them to standstill.

In the middle market, acquisition financing providers are regarded as super intelligent and hardworking. They have distinguished themselves at elite banks or consulting firms and possess the ability to synthesize voluminous levels of info into a coherent, succinct takeaway or observation. This skill is extremely valuable in attributing causation to business drivers in a financial model used to foretell the future.

The deal world thrives on the belief that the institution providing acquisition financing will deliver on their promise. Lenders usually telegraph their capital capabilities early on during the sales pitch and give their deal sizes and hold levels for their fund.