Does your business need capital to fund a growth opportunity, such as an acquisition, expanding a new product line, site development, considering plant expansion or breaking into new markets?

Where does the typical middle-market company turn for capital? Increasingly the answer may be mezzanine financing?

Mezzanine financing is a loan that IS NOT secured by a trust deed on the property, but by stock in the entity that owns the property. Mezzanine financing is a hybrid form of capital that is sandwiched between senior debt and equity. Structurally it is subordinated in priority of payment to senior debt, but senior to common stock or equity.

Mezzanine finance is often the factor that influences if a deal closed or not. When cash flow loans are restructured often there is a gap between the new asset-based deal and the amount financed previously. Sometimes additional liquidity can be obtained from equity investors. Equity is the most expensive source of capital and in most cases requires a greater forfeit in principal ownership.

This financing is advantageous for both the borrower and the lender: for the borrower is able to leverage the property typically to 90% CLTV (combined loan to value) and some lenders may go up to 95% and for the lender; in case of default, the foreclosure process is relatively streamlined.

By tapping into this liquid source of capital, you can take advantage of financial opportunities and take your business to the next level.