The Benefits of Mezzanine Loans


When you’re thinking about your financing choices for your business opportunities such as commercial real estate, mezzanine loans may be one of the loan products you’re looking at. This kind of funding can be helpful when you need to bridge the gap in cash in order to make a transaction happen. Many times, after you’ve been approved for a traditional loan, you realize that you still need a little bit more capital in order to make a big purchase. Getting another loan from a bank may not be an option if your credit is already stretched to the limit. You could go out and seek equity investors, but if you want to keep your company under your sole ownership, you may not be ready to give up some control. Choosing mezzanine financing may be your best bet. It can give you easier access to funding and help you give out less equity in your company.

Easier Access

Getting approved for a business loan often means a lengthy process of filling out applications, providing extensive paperwork and waiting for approval. Loan officers usually spend a considerable amount of time on reviewing all of your financial history and credit background. If you’ve already gone through this process for the bulk of your funding, you may not be motivated to do it all over again with the final amount you need financed. That’s where mezzanine loans can help. Your remaining funding amount can be easily secured through a simpler application process. Your credit doesn’t need to be as bogged down with this type of financing, since it is an alternative source of capital. This gives you more options down the road when you are ready to finance another investment.

Less Equity

Another thing that business owners love about mezzanine loans is the option related to equity that are offered. If you’re running out of choices for financing, you may sometimes be forced to give up parts of ownership of your company. Giving up equity means bringing other opinions into the company. Someone else may have a completely different vision for your organization. This may be a business that you built up yourself and dreamed of for many years. To have someone else calling the shots can be unfortunate. With mezzanine financing, you make a deal with a lender that holds your equity safely away unless you default on your payments. Once your obligation is met, your transaction is complete.

Mezzanine loans can be a viable source of easy financing for some types of transactions. If you’re seeking money to complete a big deal, you may want to think about this type of borrowing.