What is mezzanine finance?

Business & Management
#1

Mezzanine financing is a combination of debt and equity financing that allows corporations to acquire capital for specialized projects or to assist with acquisitions. Mezzanine finance is a type of loan that bridges the gap between debt and equity financing. It is also one of the riskiest types of finance. It has priority above pure equity but is below pure debt. However, when compared to other loan kinds, it gives some of the best returns, with rates ranging from 12 percent to 20 percent a year, with rates as high as 30 percent on occasion.

#2

Mezzanine financing is defined as a financial instrument which is a mix of ‘debt and equity’ finance. It is a debt capital that gives the lender the rights to convert to an ownership or equity interest in the company.

Few of the private equity funds prefer lending to companies, who are already a part of an existing deal or just as a separate transaction. When your organization goes bankrupt, it is more risky as the mezzanine debt is paid off later as compared to other debts, and hence, it demands a higher rate of interest.