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What can you use development finance for?

Most commonly used by landlords, homeowners and property developers to:

Mezzanine finance is a type of financing that is often used in development finance. It is a hybrid of debt and equity financing, and can be considered to be “subordinated debt”. Mezzanine finance is typically used to finance the expansion or acquisition of businesses.

What is Mezzanine Finance and what are its benefits?

Mezzanine finance is a type of debt financing that is senior to equity but junior to traditional debt instruments. It is typically used to finance the growth of young and developing companies.

One of the main benefits of mezzanine finance is that it provides companies with the capital they need to grow their business. This financing can be used to finance expansions, acquisitions, or other growth initiatives. Mezzanine financing can also be used to restructure a company’s capital structure.

  • It allows a company to borrow much more than it could receive from a debt lender on its own, and to ensure that it has all of the money it requires.
  • Repaying principal is frequently delayed till later in the loan term or at maturity. This implies that only interest payments are necessary during that time, which allows a firm to use the increased cash flow to repay other debt or promote growth.
  • In general, mezzanine finance allows the borrower to make more customised arrangements than traditional bank financing does. Depending on the company’s cash flow, interest may be rolled into the loan amount or paid in parts and rolled. So if a business can’t pay its next interest payment on time, it might postpone paying some or all of that interest until
  • It may lower the equity requirement and protect existing shareholders from having their stakes diluted.

How does Mezzanine Finance work?

One of the key benefits of mezzanine financing is that it can provide capital without giving up equity in the company. This can be appealing to companies that are not ready to give up control of the business or that do not want to dilute the ownership stake of existing shareholders.

Mezzanine financing can also be a flexible source of capital. Mezzanine lenders are typically willing to structure the financing in a way that meets the needs of the borrower. For example, mezzanine financing can be used to fund a one-time expansion project or it can be used to provide ongoing working capital.
Mezzanine financing can be expensive, as the interest rates are typically higher than traditional debt. However, the potential upside of the investment may make it worth the cost for some companies.

If you’re considering mezzanine financing for your business, it’s important to work with a lender that you trust and that has experience in this type of financing. Mezzanine lenders will often take a warrants or equity position in the company, so it’s important to make sure that you’re comfortable with the terms of the financing.

How Mezzanine Finance is structured

Mezzanine financing is typically structured as a loan or an investment.

Mezzanine loans are typically structured as second-lien loans. This means that the lender is in a junior position to the senior lenders in the event of a default. Mezzanine loans typically have higher interest rates than senior debt, but they also offer the potential for a higher return if the company is successful.

Mezzanine investments are typically structured as equity or convertible debt. This means that the lender will receive an ownership stake in the company if the loan is not repaid. Mezzanine investments typically have a lower return than equity investments, but they offer the potential for a higher return if the company is successful.

How to get started with Mezzanine Finance?

If you’re considering mezzanine financing for your business, it’s important to work with a lender that you trust and that has experience in this type of financing.

Mezzanine lenders will often take a warrants or equity position in the company, so it’s important to make sure that you’re comfortable with the terms of the financing.

When you’re ready to start looking for a mezzanine lender, there are a few things you can do to prepare:

  1. Review your financial statements and make sure they are up to date.
  2. Put together a business plan that outlines your company’s growth strategy.
  3. Understand how much capital you need and what you will use it for.
  4. Research different mezzanine lenders and compare their terms.
  5. Make sure you are comfortable with the risks of mezzanine financing.

We have direct access to the full market of mezzanine finance lenders at the Commercial Mortgages Store. To get started with your mezzanine finance, contact a member of our team today