Businesses continue to navigate a capital landscape shaped by persistent interest rate pressure, tighter bank lending, and global trade impacts. In this environment, mezzanine financing works as a vital tool for middle-market businesses seeking flexible, non-dilutive capital to continue funding growth, acquisitions, and ownership transitions.

What Is Mezzanine Financing?

When a company has reached its senior debt limit or wants to preserve future borrowing capacity, but still needs capital for growth initiatives or for shareholder-related activities, it typically faces two options: raise equity or secure mezzanine financing.

Mezzanine financing offers a compelling middle ground. While it carries a higher interest rate than senior debt (reflecting its higher risk), it is significantly less expensive than issuing new equity in terms of ownership dilution and long-term cost of capital. In essence, mezzanine can be viewed as either high-yield debt or low-cost equity.

For many companies, mezzanine is not used as permanent capital, but instead used as solution-oriented capital that performs a specific purpose and can later be replaced with a more conservative type of financing.

8 Ways to Use Mezzanine Financing

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Benefits of Mezzanine Financing

• Flexible Terms: Customizable structures tailored to the borrower’s cash flow and growth trajectory. Structures can include PIK interest, warrants, or tailored amortization schedules.
• Non-Dilutive: Often structured to minimize or delay equity dilution.
• Strategic Partnership: Mezzanine investors often bring long-term perspectives and industry expertise.

Mezzanine Business Profile

Mezzanine is best suited for companies with:

• EBITDA of $5–$50 million
• Predictable cash flows
• Clear growth or transition plans
• A need for capital beyond what senior lenders will provide

Mezzanine financing is a strategic capital solution for companies navigating a complex and evolving financial landscape. Whether used to fund acquisitions, support succession, or refinance existing debt, mezzanine offers the flexibility and creativity that today’s market demands. To learn more about how mezzanine financing can work for you, connect with our team.