Benefits of Mezzanine Financing
Introduction ď ˝
Mezzanine financing is a hybrid of debt and equity financing that gives the lender the rights to convert to an ownership or equity interest in the company in case of default, after venture capital companies and other senior lenders are paid.
Benefits of Mezzanine Financing
Here are describe the some e benefits of mezzanine financing such as:
Retention of Business Control Flexibility of Financing Terms Long-Term Perspective A less expensive, tax-advantageous alternative to equity Resulting in improved cash flows
Retention of Business Control ď ˝
Business owners who enter into a mezzanine financing arrangement do not give up control of daily operations of the business, nor are they required to make major changes to personnel. As long as the company continues to be profitable, a mezzanine lender does not take full control of the business away from the business owner.
Flexibility of Financing Terms ď ˝
Because mezzanine financing takes its position behind other business financing, business owners are afforded a greater degree of flexibility with the financing terms attached to this funding alternative.
Long-Term Perspective ď ˝
Business owners that receive financing through a mezzanine lender can expect a long-term relationship with the firm due to the unique relationship established through the combination of debt and equity funding.
A less expensive, tax-advantageous alternative to equity ď ˝
Mezzanine capital, when utilized in conjunction with senior debt, reduces the amount of equity required in a business. Since common equity is the most expensive form of capital and is not tax deductible, mezzanine debt can create a more efficient structure that lowers the after-tax cost of capital, is less dilutive than equity financing, and enhances the return on equity.
Resulting in Improved Cash Flows ď ˝
Senior debt usually has a highly structured amortization schedule with relatively short maturities, often no more than three years for privately held companies.
Structure ď ˝
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Cash interest: a periodic of cash based on a percentages of the outstanding balance the mezzanine financing. PIK Interest: payable in the kind of interest is periodic form of payment in which the interest payment is not paid in cash but rather by increasing the principal amount of the security in the amount of the interest.
Overview Mezzanine Financing
Who I Am.. ď ˝
Capital Direct Funding is a equity fund firm which provide the help in various services like: real estate and residential transactions.