Green Shoots and Mezzanine Debt

Green shoots of growth are unmistakably emerging in the economy. Unlike the early 2010’s when we slowly recovered from the Great Recession, this looks like a sharp rebound driven by pent up consumer demand and heavy doses of monetary and fiscal policy.

When growth is on the horizon, and the order pipeline is brimming with new opportunity, it is time for companies to invest. Most banks take a very historically grounded view of performance and are unable to lend unless you have at least one or two years of strong financials. Non-bank lenders such as mezzanine debt lenders are much more flexible.

They can look at pro forma adjustments and factor in extraordinary events when assessing your creditworthiness, allowing them to make decisions based on recent performance and near-term projections. This gives mezzanine debt lenders a huge advantage over banks when it comes to funding transitional capital needs of companies experiencing green shoots of growth.

These sudden spikes in demand usually come after a company has been through a tough period, where they might have gone through some financial stress. They may have funded some temporary losses through their working capital or had to restructure operations to reduce costs. Mezzanine debt lenders are experts at financing into the turn in the market and can provide funds to restore balance to your internal liquidity and extra funds to power growth.

The most popular growth investments for companies growing into the market turn are inventory build-up, system investment, headcount increases and new product launches.  Companies that have a stable, adjusted EBITDA trend who have opportunity to grow fast, should strongly consider mezzanine debt funding to power their green shoot growth. It will plug the funding gap for your business and provide a strong, strategic funding partner for future scale up opportunities.