Raising Mezzanine Debt through Mezzanine Lenders

Posted on: February 25th, 2015

wisdom of dollar

For medium sized business, mezzanine debt is often the surest and safest way for pursuing acquisitions. With the reduction of senior bank credit, mezzanine loans conveniently fill the gap by providing the required capital, without taking on a controlling stake as with equity financing.

Mezzanine is a middle ground solution that gives you more funding than a bank at a fraction of the cost of bringing in an investor. Mezzanine debt is usually acquired from mezzanine lenders who are independent funds who make loans to companies that fit their criteria. For a mezzanine lender the debt instrument provides a stream of income and some downside protection, while the warrant feature offers the potential for upside gains.

Most mezzanine lenders have specific lending criteria that determine the financial focus, the size of the loan, and the industries focused upon.

The role of financial advisory firm in raising mezzanine debt

The smartest and best way to bring in mezzanine debt is to approach a well regardedfinancial advisory firm that provides mezzanine funding solutions. These firms are often a gateway to the mezzanine lender community.

A good firm will give you structuring advice, presentation advice and connect your with a large number of reputable lenders. The firm will leverage its reputation to get your deal in front of the right mezzanine lenders.

Please call us. We can help provide quick sourcing solutions for your mezzanine debt financing needs.

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.