Mezzanine Finance is a hybrid financial product, in that it features the characteristics of both a debt and an equity financial instrument. It is used predominately by large, well established and profitable businesses in their transactional activities when making acquisitions. Private Equity backed businesses often take on some form of mezzanine finance.
Mezzanine debt is typically more expensive than other longer term sources of finance, due to the fact that the borrowers are unable to secure any meaningful security in the business that they are making their loan to. Providing the borrower’s business performs as expected the high yielding debt is repaid in the normal way. However, should the borrower default on any part of their mezzanine loan, the lender will usually be able to invoke conditions in the loan agreement to secure a proportion or all of the equity in the business.
For further assistance and help in securing mezzanine finance facilities call 01423 423 042.