Mezzanine Funding - Meaning, Need and Types.

 

Mezzanine funding is a type of junior capital between senior debt financing and equity. In short, a means that companies can access capital from. Let’s understand its features in detail. 

Mezzanine funding can either be defined as a portion of the savings given by private equity, and taking further loans from multiple investors to provide funds for the purchase; or it can be categorised as private equity that come from company’s own savings and then they further take debt from the company itself to arrange the funding. Hence, in this type of funding there is a risk factor, which is much higher and the expectation of benefits is also high. 

Definition of Mezzanine Funding

Mezzanine financing is a mix of debt and equity financing that gives the lender a right to convert it to an equity interest in the company mostly when the capital companies and other senior lenders have already been paid. 

Mezzanine debt consists of equity instruments also known as warrants, which increases the value of the other debts and increases the flexibility while dealing with the bondholders. Moreover, Mezzanine funding is associated with acquisitions and buyouts, this can be used to give priority to the new owners before the existing owners, especially in case of bankruptcy.

Original source of this blog: https://www.resurgentindia.com/mezzanine-funding-meaning-need-and-types

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