If you’re planning to buy a business, mezzanine financing can give your financial structure more flexibility. Buying a business can be quite a challenge financially. In a transaction, the sources of funds are usually the buyer’s investments, seller finance, and a loan from a financial institution. However, many buyers also use mezzanine financing. Mezzanine financing combines debt financing with equity financing that is not secured by specific assets, but rather by the company’s past and expected cash flows.
Mezzanine financing is much more flexible and has several advantages:
– Requires little collateral: does not require specific collateral assets and as a rule, requires minimal personal collateral.
– Flexible repayment: can be personalized according to how much you can afford.
– Equity financing: Easier for you to obtain financing from other banking institutions.
– No dilution of shares: Entrepreneurs retain full control of the company.
– Option of financing unsecured intangible assets.
– Can be a lending capital: so you can postpone repayment of the capital of your financing.
Despite all the pros, Mezzanine financing also comes with a couple of cons:
– Cash flows must be predictable and the terms and conditions can be demanding because they’re more flexible.
– More expensive than a conventional loan.
Get the best support when buying a business. The Mergex team will make sure you make the right decisions and help you through the complexities of the often arduous financing process. Contact us now to find out more.