Mezzanine / Mezz
Mezzanine / Mezz mezzanine debt is a hybrid form of financing that sits between senior debt and equity in a company's capital structure.
It provides flexible capital for growth-stage companies seeking expansion funding without significant equity dilution.
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How Mezzanine / Mezz Works
Mezzanine financing offers a unique solution for companies needing growth capital by combining debt and equity characteristics. Unlike traditional financing, it provides more flexible terms that allow businesses to access capital while maintaining ownership control.
The financing typically involves a loan with higher interest rates (8-15%) that can include payment-in-kind options and equity participation rights. This structure allows investors to receive both current income and potential future upside through equity features.
For lower middle market companies, mezzanine financing serves as a critical bridge between traditional bank debt and institutional capital, enabling strategic growth initiatives and management buyouts with minimal ownership disruption.
Key Points
- •Hybrid capital structure with debt and equity characteristics
- •Interest rates typically range from 8-15%
- •Provides flexible financing with minimal ownership dilution
- •Ideal for growth-stage and management buyout scenarios
- •Requires proven cash flow and consistent EBITDA generation
Frequently Asked Questions
Related M&A Concepts
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