Mezzanine Financing for Smart Guys

Posted on August 5, 2013

No Dummies here — our clients and friends tend to be very bright people.  Because they also tend to be very busy, we thought it might be helpful to use our most recent closing to provide a brief primer about middle market mezzanine financing.

You can click on the tombstone image to the left to get the full details of the $5 million mezzanine debt placement we arranged for our fast growing, innovative client, Paramount Merchant Funding LLC.

Mezzanine debt is a key component of leveraged private equity financial structures, but it also serves an important role for companies operating in the middle market.  As companies grow rapidly, their capital needs frequently outstrip the capital available to them.

Typically new enterprises are funded with the founders’ personal capital and loans supported by their personal assets or credit.  Often they reach out to friends and family to provide additional support. Additional working capital may be provided by a factor or an asset based lender; however, if growth is rapid, the business will eventually outstrip the limits of these resources and the founder’s personal financial resources will not  support continued growth.

For a step-by-step video how-to guide for obtaining mezzanine financing, click on the image below and view the tutorial.

To download the associated PowerPoint Slides click here.

In the past the needed capital was frequently provided by banks which relied upon the borrower’s character in addition to the liquidateable value of its assets. That is a thing of the past. Today, banks without clear collateral  support to back their loans will soon invite the ire of regulators. With this regulatory threat hovering over them, most bankers have effectively abandoned the small business community in its time of need.

This has created a financing gap increasingly filled by mezzanine lenders. These firms are often structured … read the rest