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Pursue Growth with Mezzanine Financing

Mezzanine financing can be an ideal option to fund growth projects, take advantage of market opportunities or have extra cash on hand to address continued uncertainties.

What is mezzanine financing and how does it work?

A blend of debt and equity, mezzanine financing can enable a company to qualify for financing beyond what they could expect in a traditional loan. It sits “between” debt and equity on your company’s balance sheet and includes an option for lenders to convert the financing that they have provided into equity if a borrower is unable to satisfy the terms of their loan.

pursue growth with mezzanine financing

When should companies consider mezzanine financing?

Mezzanine financing may be an excellent solution if your business has strong cash flow and you want to raise funds for a specific purpose, such as to expand the business or your operations, pursue a merger or acquisition or secure working capital to assist with an ownership transition.

Mezzanine financing is also a fit for companies that have exceeded (or want to preserve) senior debt borrowing capacity, need capital to grow and do not want to raise outside equity. While more expensive than traditional senior debt, mezzanine financing is often a lower-cost alternative for the borrower as equity has a higher investment return expectation and interest-only lump sum payments instead of installments.

What are some of the benefits of mezzanine financing?

Collateral is not required, and flexible terms are available. The financing is often referred to as ‘patient’ capital because it supports your long-term growth.

In addition to its benefits for borrowers, mezzanine financing is also attractive to lenders and investors because they gain equity in the business or the option to buy the stock of the issuing company at a fixed price later and receive interest payments monthly, quarterly or annually. This may significantly increase an investor's rate of return.

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