subordinated debt
or preferred equity instrument that represents a claim on a company's assets which is senior only to that of the common shares. Mezzanine financings can be structured either as debt (typically an unsecured and subordinated note) or preferred stock.Your Feedback Matters! How was this Answer?
Shifting, House?
✔
Lowest Price Quote✔
Safe Relocation✔
Professional Labour✔
Timely Pickup & Delivery
Intercity Shifting-Upto 25% Off
Check Prices
Intracity Shifting-Upto 25% Off
Check Prices
City Tempo-Upto 50% Off
Book Now
When a company tries to raise funds from the market, there are some channels it can go for; one such option is receiving mezzanine capital. Now, what is mezzanine capital? Let’s find out:
It is a hybrid form of funds that lies in between pure debt and pure equity financing of the capital structure of a corporation. It enables investors' rights to convert into an equity interest in case the company defaults.
A company would go for mezzanine capital as a way out when either it wants to preserve its ability to raise funds through debts in the future or if it has exhausted its borrowing capacity.
This type of capital remains a choice for companies for immediate capital requirements. It is perceived as costly since companies are required to pay out a higher interest rate than funds borrowed from the bank. It’s an expensive debt; also less dilutive.
I hope now you know what is mezzanine funding.
ProsMezzanine financing is unsecured debt, and there’s more flexibility involved for borrowers while taking on the debt, as no assets are required to be offered on lien.
In comparison with private equity investors, mezzanine investors target a lower cost of capital.
This type of debt is tax-deductible for borrowers.
It allows a borrower to get additional sources of income when they have exhausted every other option.
It’s a very costly form of financing for an organisation.
Owners are required to sacrifice equity and control in case anything goes wrong.
Mezzanine lenders are ones who want to have a long-term strategic relationship with the organisation, instead of getting a quick RoI.
Avail NoBroker’s Housing Loan Services if You’re Looking to Buy Your Dream House
Read more:
What is capital account convertibility?
What is capital expenditure?
What is capital gain account scheme?
I hope you liked my answer on what is mezzanine capital.
What is mezzanine capital?
Yogi
115 Views
2
3 Year
2022-06-23T18:06:10+00:00 2022-06-23T18:35:43+00:00Comment
Share