Mezzanine capital financing
Benefice from Mezzanine financing!
Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert to an equity interest in the company in case of default, generally, after venture capital companies and other senior lenders are paid.
Mezzanine debt has embedded equity instruments attached, often known as warrants, which increase the value of the subordinated debt and allow greater flexibility when dealing with bondholders.
Our Mezzanine financing Services offers:
Mezzanine financing is a way for companies to raise funds for specific projects or to aide with an acquisition through a hybrid of debt and equity financing.
This type of financing can provide more generous returns compared to typical corporate debt, often paying between 5% (interest) and 33% (net return) a year.
Mezzanine loans are most commonly utilized in the expansion of established companies rather than as start-up or early-phase financing.
Use Mezzanine financing with acquisitions and buyouts, and prioritize new owners ahead of existing owners in case of bankruptcy.
Don’t waste time! Talk to the experts and take Advantages of Mezzanine Financing.
Mezzanine financing may result in lenders—or investors—gaining equity in a business or warrants for purchasing equity at a later date. This may significantly increase an investor’s rate of return (ROR). In addition, mezzanine financing providers receive contractually obligated interest payments monthly, quarterly, or annually.
Borrowers prefer mezzanine debt because the interest is tax-deductible. Also, mezzanine financing is more manageable than other debt structures because borrowers may figure their interest in the balance of the loan. If a borrower cannot make a scheduled interest payment, some or all of the interest may be deferred. This option is typically unavailable for other types of debt.
In addition, quickly expanding companies grow in value and restructure mezzanine financing into one senior loan at a lower interest rate, saving on interest costs in the long term.
We can do more than just be your partner. Contact us today and learn more about our cutting-edge solutions designed for Mezzanine Financing.
Mezzanine finance vs. equity investment
- Venture capitalists are willing to accept a relatively high rate of failure and search intensively for companies that will attain extraordinarily high rates of return in order to boost average returns. On the other hand, in mezzanine finance, firms are not expected to achieve highly elevated levels of internal rate of return, but rather sustained growth.
- Equity investors often require significant changes in governance and company control as providers of financing expect to play an active role in guiding the development of the company. In contrast, mezzanine financing does not imply relinquishing control and is more closely based on traditional bank loan covenants.
- In venture capital finance, the investor is willing to provide financing to firms with negative cash flow while demanding higher rates of return in exchange. Instead, mezzanine finance is most frequently used in a later or expansionary phase of the firm, after the company has attained profitability.
- Venture capital finance is often undertaken with the assumption that the firm will not achieve positive cash flow for a certain time and will thus require several rounds of financing. Conversely, Mezzanine finance implies an obligation for the firm to pay interest promptly and eventually to make additional payments linked to agreed upon repayment terms and in many cases additional returns tied to the performance of the company.
Although mezzanine financing is geared towards firms that are profitable, there are some unique cases in which it can be useful when approaching the expansion stage, but still incurring a negative cash flow. If investors are convinced that there is a reasonable likelihood the firm will achieve sufficiently strong cash flow relatively quickly, they may be willing to accept comparatively small interest payment early in the life of the mezzanine facility with a larger share of interest and equity repayments occurring in the latter stages.
Don’t waste time! Talk to the experts and take Advantages of Mezzanine Financing.
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