What is Mezzanine Financing
If a developer is utilising a traditional financing model, either by taking on additional debt via a loan or by selling off equity in the finished project, they may find that the funding acquired does not cover the total cost of the project. This is where Mezzanine Financing with its hybrid of funding methods can provide the ideal solution, as developers seek to ensure water-tight funding for their project.
Mezzanine Financing will typically utilise subordinated debt to raise the additional funding, with additional funding coming from equity rights which are signed over to the lender. If setup correctly, Mezzanine Financing can be highly effective and if needed, we can facilitate discussions with the lender to ascertain if the interest can be covered by an additional equity stake as a potential way to reduce repayments.
To learn more about mezzanine financing, get in touch with our expert team today.
Mezzanine Financing and your interest options
There are several ways in which interest can be paid on mezzanine financing. One method is to agree on an interest term, and then simply pay the accrued amount at the end of this term just as you would with a standard loan.
A second method is to utilise the same negotiated term model but to add the value of the interest accrued in each term to the overall value of the loaned funds. This method however, may not be optimal as it could result in a longer repayment term and more interest overall.
Ways to reduce your Mezzanine Financing interest
Alternatively, we can facilitate discussions with the lender that can see the interest being covered by an additional equity stake. This enables you to reduce the amount you have to pay back over the course of the term, but also how much equity you retain in the project.
To learn more about mezzanine financing, and to see if this option is right for you, get in touch with our expert team today.