Here’s what you need to know.

Mezzanine financing is a product between equity and financing and traditional debt. It’s used for recapitalizations, acquisitions and funding growth. Some of the benefits include:

• These types of loans usually have longer repayment terms than conventional banks. Getting a Mezzanine or Equity Capital financing product also allows small businesses and other companies to get more funding relative to their equity investment.
• There are a few downsides, including that this type of financing requires a positive cash flow and is generally more expensive than term debt.
• Increased flexibility is another advantage. There’s no collateral involved. That means a business looking to get one of these loans doesn’t need to put up assets or real estate as collateral. Growth prospects and cash flow are all that’s required.

This is an excellent tool that can add a lot of flexibility to the structure of your capital. If you’re looking at acquiring a business but are facing financing challenges, this hybrid of equity and debt is a good solution.

Here’s another advantage for bigger companies. This type of financing has a lower cost of capital even though it generally has higher interest rates than more traditional or senior debt. Using mezzanine financing means you’re taking a cheaper route than raising capital by issuing new equity.

OMJ Mortgage Capital is a boutique mortgage broker in the Greater Toronto area that focuses on luxury properties, development, construction, land, and commercial financing. We can arrange a mortgage through different financial institutions and alternative lenders. Let us look after your Mezzanine and Equity Capital Financing needs today.

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