5 Reasons to Anchor your Rotation with a Mezzanine Loan

Posted on: November 23rd, 2015

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The New York Mets are a prime example of finding success through a dominant pitching staff. The team was built from the bottom up, drafting and developing players year after year to carry them to the World Series, similarly, a mezzanine loan can offer your business the same potential for growth and boost the value of your company – all while empowering you to draft and develop your own principles.

Do you need that star ace that dominates the batters he faces?
Mezzanine loans can provide 100% of the funding needed for an acquisition or buyout.

Looking a starting rotation that can find the way to get the job done?
Mezzanine loans are a great place to start. Lenders assess creditworthiness through the stability of the company’s cash flow over time.The loan amount is viewed as a multiple of your company’s EBITDA. The lower the multiple, the better.

Trying to find the bullpen that can throw some innings without giving up a run?
Lenders are concerned with getting back the money they invest. The same way a team looks for a return on the money it invests in its players. For a mezzanine lender, returns are made primarily through interest rates and secondarily through upside on their warrants.

It’s time to rebuild for long-term triumph?
Mezzanine lenders have a long-term focus. Their money should be used to build up the profit of the business over the first two to three years. If the borrower does this successfully, the borrower will be able to repay the loan or refinance the loan easily.

Challenged by a shaky bullpen?
Mezzanine lenders see themselves as patient investors who will work with the management team to get through any challenging times. These loans are long term often with 5 to 7 year maturity dates.

A mezzanine loan is a smart solution that can provide all around growth, expansion and prosperity for your business.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.