Mezzanine Finance is designed to support the capital requirements of firms in their growth stage. This growth phase usually comes in the form of an acquisition or expansion. For these businesses to grow bigger and faster, they need strategic capital which is beyond what a bank loan can provide during this period.
The loans given in terms of mezzanine financing are predicated upon cash flow or EBITDA. The amount lent here may be structured as a function of growth capex requirement or a multiple fixed on EBITDA; it’s worth noting that repayment starts towards the end of the term when there should be enough cash flow through execution at scale-up level to cover back-ended repayment.
Mezzanine lenders evaluate and provide loans using special instruments. Usually, they start by forming an opinion regarding the company's enterprise valuation. After that, in order to guarantee the amount of cash flow available for loan servicing, they examine the historical adjusted EBITDA. Through a comprehensive study of the firm and industry, they can approve loans that banks would not.
Mezzanine financing is ideal in the following kinds of growth scenarios:
Acquisitions.
Regional expansions.
Product & Distribution investment.
Capacity expansion.
Partner buy-outs.
These loans offer a high degree of financial flexibility and are tailored to your unique cash flow. Mezzanine finance is the ideal option for quickly expanding businesses in need of a patient, long-term financial source.
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