Appetite for Mezzanine Funding in Current Market

Posted on: March 28th, 2013

Mezzanine Funding Mezzanine lenders have a strong appetite to put out new loans in the current market. A lot of mezzanine lenders have raised new funds and are open for new loans.

Many companies need capital to fund growth. Given the low interest rate environment, most companies want low interest rate loans – 4% to 5%.

Unless a company has solid assets to lend against, they will not get a low interest rate loan from a bank. Yet, the interest rate on mezzanine loan of 12% scares them, as it appears unaffordable.

This creates a gap – mezzanine lenders wanting to make loans but business owners scared to take them because of the price. Attract Capital to the mezzanine funding rescue!

Mezzanine loans are more expensive than bank loans but they are much more beneficial than bank loans. Mezzanine loans are against cash flow, not assets, so you will get more money than a bank loan.

Also, the principal repayment for mezzanine loans does not start right away – it is delayed two to three years to give the company the ability to use the extra cash. So you can do MUCH BIGGER things with mezzanine funding, leading to much more dramatic growth.

Looking to buy your competitor, mezzanine funding can fund that. Looking to build your cash reserves to spend more money on new products and marketing, mezzanine funding can fund that as well.

Have we whetted your appetite for mezzanine funding? We hope so!

As the Fed decides to ease interest rates, middle market acquisition financing structures will benefit in a number of ways. The underlying values of middle market companies will increase leading to a higher enterprise value and lower loan to value ratios for existing portfolio companies of acquisition financing lenders.

The role of acquisition financing is infrequently elevated above a functional transactional one. When a business needs financing to acquire, they go to the market and source acquisition financing to supplement their equity investment to close the deal. Despite existing in many different forms, acquisition financing is rarely explained in terms of the value it brings to the acquirer.

Acquisition financing underwriting usually focuses on business and financial issues that underpin the stability of cash flow. Providers of acquisition financing usually validate the durability of a company’s competitive advantage and the depth of its resource base. Environmental issues are usually not a major part of the analysis in today’s service and technology-based economy.