Mezzanine Financing

Mezzanine financing is used as the way for publicly and privately held companies to get the financing they need without going public.  Mezzanine financing helps a company avoid the potential of yielding ownership of their company. Mezzanine financing is a mix of traditional debt financing and equity financing. Mezzanine financing allows some of the benefits of both to be garnered.  Mezzanine financing  is like equity financing in the sense that it is unsecured and does not require collateral to be put up, as is necessary with traditional bank loans. Mezzanine financing is also like debt financing with a flexible structure that does not necessarily insist ongiving up an interest in the company.

It is important for small business owners to note that mezzanine financing relies on very high interest rates. Mezzanine financing is established with in the 20-30% range of interest to make it profitable. Unlike a bank loan. The lenders that offer mezzanine financing do not hold real assets of the business as collateral. The lenders providing mezzanine financing are within their rights to convert their stake to an equity or ownership in the company the event of a default on the loan.

Owner of privately held companies like the liquidity mezzanine financing can provide. Everyone knows that a privately held company cannot get the same sort of fluid capital flow as a publicly held company. Mezzanine financing provides a way to balance that situation without going public. The providers of mezzanine financing do not have rights to an interest in the business except in the event of a default. Mezzanine financers prefer not to want an interest in the company. Traditional equity investors like to have some level of control which is uncomfortable many private owners. Mezzanine financing type loans give business owners the reassurance that the lender will help ensure the debt is paid without resorting to default. Please contact Strong Business Credit for more information about mezzanine financing.