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Mezzanine Debt & Subordinated Debt Financing

Business Capital: Delivering Financing for Growing Businesses

For a company to continue to grow in today’s competitive business world, it is important to take advantage of certain opportunities sooner rather than later. Unfortunately, for businesses that are dealing with large amounts of business debt or financial problems, acquiring the right commercial funding can often seem impossible. At Business Capital we help businesses reduce debt and we can also arrange financing to expand capabilities and increase profitability. We focus on crafting innovative solutions to the long-term capital needs of a wide range of businesses in an array of industries, and can deliver both senior and subordinated / mezzanine capital.

Mezzanine loans will play an increasingly important role in meeting the financing needs of companies in the coming years. With the tightening of leverage multiples for senior debt, a growing number of companies and equity sponsors are turning to mezzanine debt as a solution to their capitalization requirements.

Structure

Mezzanine financing can be entirely debt pieces or structured as a mixture of debt and equity and can provide the returns of a traditional private equity fund while presenting a lower risk profile. Mezzanine lenders  prefer to fund structures that allow participation in the growth of the company. A warrant or other equity enhancement is the usual instrument for this participation. The warrant, interest rate and fee expectations are proportional to the risk of the investment.

Benefits

Mezzanine financing is advantageous because it is treated like equity on a company’s balance sheet and may make it easier to obtain standard bank financing. It is often provided to the borrower very quickly with a lesser amount of  due diligence on the part of the lender and collateral on the part of the borrower.

Parameters

  • Management teams must be able to demonstrate previous ability to manage an organization of comparable scale and complexity as the proposed investment.
  • Management should have a proven track record of integrity, commitment, experience, and dedication to growth.
  • Management teams should have substantial equity stakes, a history of profitability, a viable plan and motivated to create shareholder value.
  • Industry focus:  broad range of manufacturing, technology, software, intellectual property, and service industries. Industries prefered have longer product life cycles and little to no risk of technological obsolescence.

Subordinated debt is an extremely flexible form of financing.

Mezzanine lenders are concerned with overall yield, so are more liberal than a senior lender might be in tailoring their investment to meet the financial, operating, and long-term cash flow needs of the borrower. As long as the subordinated lender’s anticipated yield is satisfied, they can be flexible as to the amortization of the loan and the interest rate.  To find out more about mezzanine loans, debt financing and  Business Capital’s  other  services,  contact us or fill out the online questionnaire today. We will show you the variety of ways we can meet your needs and help your company achieve financial success.