A guide is more or less a map. It points you in the right direction and tells you the most opportune route to get to your destination. We all have some sort of navigation device, whether it is a physical map, a Garmin car navigator, or our smartphones. However, companies lack a true navigator to mezzanine financing.
What is mezzanine financing?
Mezzanine financing or capital is an advanced form of lending based on a company’s cash flow. This loan is structured based upon a Company’s level of EBITDA. It is transitional capital that funds transformational expansion for a business, allowing it to dramatically increase its profit.
Where can I get mezzanine financing?
Mezzanine loans come in all different shapes and sizes. The one that fits best for your company is based on the purpose for the funding and the structured agreed to between the borrower and lender. Each loan is custom and has slightly different elements.
How does one find mezzanine financing?
Mezzanine lenders are private businesses best approached through a knowledgeable advisor.
How does one qualify for Mezzanine financing?
Mezzanine lenders understand businesses are built on expansion and growth. The mezzanine lender assesses the company’s cash flow, potential growth and profitability. Companies that have stable financial performance, a strong plan for the future, and revenue greater than $20 million are prime targets for mezzanine capital.
How much does mezzanine financing cost?
Mezzanine funding often comes as a 5-year term loan with interest only during the term of the loan. There is no personal guarantee to the owner of the company. Mezzanine loans are based on a multiple of the businesses trailing twelve month EBITDA, or earnings before interest, taxes, depreciation and amortization. The interest rate is usually 12% because the loan is unsecured and non-recourse. The lender also requires some additional return through a small equity kicker.
Who can help me find a mezzanine loan today?
A financial advisor professional with the expertise and experience is a great place to start. The advisor understands the structure of mezzanine financing and how it would work with your company.
By knowing the answers to these questions, you are now prepared to go find the mezzanine financing that fits your business. The wheel is in your hands as you drive the car to a mezzanine financing.