Attracting capital and investment into your business is essential when it comes to a successful launch and subsequent growth. Unfortunately, this isn't always possible without using physical personal or business assets as security, or bringing additional shareholders into the company in exchange for funds.
Mezzanine finance is designed to overcome both of these challenges with lenders injecting a lump sum of capital into the business whilst prioritising the repayment of other debts in the event of a default.
For example, business debts are usually structured to be repaid starting with senior debt, followed by senior subordinate debt, subordinated debt, mezzanine debt, and then the business owner's own investment. Therefore the mezzanine lender is amongst the very last to be paid if something goes wrong.
Use your positive cash flow to fund further growth with mezzanine finance.
Mezzanine finance is ideal for businesses with a proven financial track record within their industry. A loan of this type can provide the perfect financial catalyst for businesses looking to expand given that most mainstream lenders will require evidence of a strong cash flow before issuing a standard loan.
This can pose a big problem for businesses whose expansion plans are outweighed by their existing cash flow, usually forcing them to seek outside investment in return for shares or ownership. It's something that you may wish to avoid, particularly if you're looking to buy out another firm or float the company which could add almost immediate value to the overall business.
It can therefore act as a great workaround for any business with strong profit figures, looking to raise substantial funds without sacrificing ownership
