Raise business capital by Mezzanine Finance/ Mezzanine Capital. Ideal for good business potential firms who are unable to takeoff due to lack of funds.
Another great way of raising funds for your business is by “Mezzanine Finance” or popularly called “Mezzanine Capital”.
In this video tutorial, we discuss how to raise funds for business by Mezzanine finance, which is becoming very popular among high growth sector companies especially when they are planning for ambitious expansion programs or when undertaking large projects since they require huge funds as the business potential is very high.
Mezzanine Finance typically do not require payment during the term of debt but only at the end of the term. Mezzanine finance is very ideal for those companies who prefer to inject immediate liquid funds & cash into the business. It is quite popular among many property developers in India to obtain other additional loans for their ongoing development projects where the business potential is very high.
When the business potential is good and companies planning very ambitious expansion programs but unable to take off due to paucity of funds, then mezzanine finance will be very appropriate. This is a Capital resource that is in between less risky & high risky equity that has both equity & debt features.
Mezzanine Finance is a combination of debt & equity financing and is positioned midway between debt & equity. Mezzanine finance is normally shown as an asset on the company’s balance sheet since it will be easier for the company to obtain other bigger loans from other bigger institutions as these loans are shown as equity in the balance sheets.
Since it is an unsecured subordinated debt, the risk for the financiers is quite high and hence it will be quite expensive for the borrowers. Mezzanine debt holders also require a higher return for their investments than secured or senior lenders. The rate of interest will be quite high compared to the normal borrowings. The maximum tenure of mezzanine finance is upto 5 years.
