Mezzanine Financing: A Hybrid Debt Solution
Mezzanine financing provides companies with the ability to raise funds for specific projects or for the selective acquisition by offering a form of debt and equity financing. Beyond this, mezzanine financing is also embedded in mezzanine funds. The latter represent a sort of pooled investment, again like a mutual fund, granting financing under the guise of mezzanine financing with significantly qualified businesses. This form of financing can provide greater returns to investors than corporate debt, which may pay as much as 12% to 30% per annum. Mezzanine loans are most commonly utilized in the growth expansion of existing businesses and not as start-up or early-stage capital. Both mezzanine financing and preferred equity can be taken out and retired with lower-interest financing if the market interest rate declines significantly. How it works : Mezzanine financing fills the gap between debt financing and equity financing and is considered one of the highest risk forms of d...