What Mezzanine Financing is All About

As everyone who has ever taken a business class knows, you have got to spend money to make money.  You try to help your company grow but sometimes you are not able to obtain sufficient funds to help your business grow.  Many times a company will go to a bank to obtain a loan but if you do not have the collateral to back it up, it will not be approved.  One way to solve this problem is through mezzanine financing. 

Mezzanine financing consist of a hybrid mixture of debt financing along with equity financing.  In mezzanine financing, the company receives an unsecured loan from the lender.  In return for the loan, the lender will able to convert his loan into a stake in the company should the loan be defaulted upon.  Since they are done rather quickly and there is no form of collateral for the lender, the loans do typically carry a very aggressive interest rate of around 20-40%. 

There are many ways to obtain mezzanine financing.  A good source to start looking at is private investors.  Mezzanine financing appeals to private investors because of the high interest rate that will be paid back to them and the possibility of obtaining a stake in the company should they not be repaid as agreed to. 

Though it seems simple, not all companies looking for mezzanine financing will be able to get it.  First, the company looking for mezzanine financing needs to have a good track record of repaying lenders.  They also must have a solid plan for expansion or at the very least, company growth.  The company must also have an established product and steady business.  Last, the company must have a history of obtaining a profit. 

Mezzanine financing is a great way to raise money quickly for company expansion.  If you and your business are looking to raise money, let American Corporate Turnaround help you out.