Mezzanine Financing
Revolutionizing Commercial Lending Solutions
Cerebro revolutionizes mezzanine financing with a proven data-driven marketplace to help middle market companies get needed capital.
Mezzanine Loans: $5 million – $100+ million
Mezzanine Financing Options for Companies Seeking to Grow, Expand, or Acquire
What is Mezzanine Financing? It is a capital resource that sits between senior debt and common equity in the form of subordinated debt, or a combination of the two securities.
This structural flexibility allows mezz financing to be tailored to accommodate a number of objectives, and when exploring a new source of corporate financing, it is imperative companies find a lending partner to understand and meet their specific needs.
The traditional approach to sourcing a mezzanine lending partner often takes months to years, with no efficient way to compare potential partners and ensure you find and close the better deal.
Cerebro’s revolutionary platform changes that by using data-driven processes to match your request to our network of 2200+ pre-qualified lenders, eliminating time-consuming screening calls and meetings, enabling you to compare term sheets side by side and guiding you every step of the way to help you find and close the better deal, faster.
*Cerebro Capital currently does not support investment real estate deals, project financing, startups or pure equity transactions.
Mezzanine financing available to:
- Growing operation companies
- EBITDA over $2 million
- Maximum debt-to-EBITDA ratio of 3x - 5x
Mezzanine loans typically are:
- Loan amounts of $5MM - $100MM+
- Unsecured
- Interest-only payments with no amortization of principal
Is Mezzanine Finance Right for You?
Mezzanine financing combines the advantages of senior debt and common equity to form one of the most flexible types of debt capital financing available to middle market companies. The capital obtained through mezzanine financing can be used for everything from growth capital or acquisition financing to shareholder liquidity, inter-generational transfers or research and development. It is an ideal financing vehicle for middle market companies that are in need of additional capital beyond what is available through traditional senior lenders at a cost that is often lower than that of equity financing.
PROS of Mezzanine
- Less expensive than equity financing
- Enables current shareholders to retain control
- More flexible than senior debt
- Higher risk appetite & more patient than senior debt
- Less onerous covenant requirements than senior debt
CONS of Mezzanine
- More costly than senior debt
- Modest warrant participation may apply
- Prepayment penalties may apply
- Borrower must adhere to some covenants
Ask Yourself These Questions
Do you have capital needs beyond what your senior lenders can offer?
Do you have immediate goals that require growth capital?
Are you looking to expand your access to capital without selling your business or making personal guarantees?
Is your company looking for acquisition financing that is cheaper than equity and more flexible than senior debt?
A Deeper Look into Mezz Financing
Rather than senior debt or equity, mezzanine financing is a flexible capital source that is a good option for companies with high growth profiles with top-line revenue growing at 15% or more and healthy, consistent cash flows for a sustained period. Private equity funds or small business investment companies (SBICs) are the typical mezzanine lenders. Mezzanine funds are most comfortable providing mezzanine financing to companies with an EBITDA of $2MM or more, but each mezzanine fund has its own profile. Mezzanine credit facilities are structured as a combination of debt and equity securities, tailored to the unique needs of the borrowing entity:
Cash Interest Payments: a periodic cash payment based on a percentage of the outstanding balance of the mezzanine financing. The interest rate can either be fixed, variable based on a base rate (i.e. LIBOR), or a combination thereof (for example, the rate could be fixed for a certain period, then variable thereafter).
Payable In Kind (PIK) Interest: PIK is a periodic interest payment, where the payment is added to the principal instead of being paid in cash. This structure can alleviate short-term strains on cash flows.
Ownership Interest: Mezzanine capital employs a number of different instruments to convey ownership interest, including preferred equity, warrants and/or conversion features (similar to a convertible bond). The specific mix of securities used depends on the nature of the financing and the preferences of the borrower and mezzanine lender.
Click here to find the right mezzanine lenders.
Better Mezzanine Loan Options with Cerebro Capital
Cerebro Capital is revolutionizing the way middle market companies find and close mezzanine financing through our data-driven platform, national lender network and proven proprietary matching process.
When you work with Cerebro, the days of reaching out to brokers, debt placement advisors or funds individually, wasting time on redundant screening calls and wondering if you’re getting a competitive term sheet are over. Our platform pulls real-time lender data and matches your deal against the profiles of our 2200+ lender network, while keeping your information confidential, matching you with the ones most likely to be interested in competing for your business.
Once your deal has been matched with interested lenders, you select the lenders that you want to share your information with and the Cerebro platform facilitates due diligence and negotiation in our secure data room, making it easy to manage requests and giving you peace of mind that your company’s information is kept confidential. Throughout this process, our expert transactions team provides you with market data from similar companies and works with you to ensure you get – and close – the better deal.
The results companies have achieved working with Cerebro speak for themselves: Sourcing loans from $2 million – $100 million, Cerebro gets your loan profile lender interest within 48 hours, reduces interest rates by an average of 16%, increases loan amounts on average by 19% and reduces fees by up to 41%.
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$5.6B
committed proposals
$10MM
average loan size
$2MM - $100MM
loan amounts
2,200+
top lenders
How Mezzanine Loans Can Support Your Business
With more flexibility than traditional banks can offer, while maintaining substantial equity, mezzanine financing can support otherwise-challenging business objectives for middle market companies, including:
Shareholder Liquidity
Mezzanine financing is an effective vehicle for owners of closely-held, private companies to obtain liquidity and diversify their holdings, without selling the business or providing personal guarantees to a senior lender – allowing owners to diversify their holdings or recoup years of cash flow reinvestment via a one-time dividend.
Acquisition Financing
For an expansion-oriented company, obtaining the capital required for an acquisition can be challenging – often requiring the company to either (i) raise additional capital via equity investors or (ii) find a traditional bank lender willing to finance the deal, then accept restrictive terms and covenants. Mezzanine debt provides a solution that is cheaper than equity, but more flexible and less burdensome than senior debt – all while delivering a higher return to current equity holders.
Growth Capital
Mezzanine financing can be well-suited for established middle market companies seeking to expand operations into new markets, increase capacity or make investments in research & development, but which lack the access to commercial paper or global credit markets enjoyed by large-cap companies. For companies in this position, mezzanine financing offers a solution that is cheaper than equity and more flexible than senior debt.
Ownership Transition / Inter-Generational Transfer
For shareholders of closely-held, middle-market companies seeking personal liquidity along with a transfer of ownership to other current shareholders – either a younger generation or the current management team – mezzanine financing is ideally-suited to facilitate this outcome. In this situation, rarely does the younger generation or management team have the personal assets required by traditional senior lenders to finance the purchase. Mezzanine financing provides an ideal vehicle to facilitate this transition for the reasons stated above: it is less dilutive and less expensive than equity, and doesn’t come with the capital requirements or restrictive covenants demanded by senior lenders – allowing the outgoing shareholders to receive a fair market value on their equity and the new majority owners to naturally leverage their return.
Mezzanine financing is an ideal financing vehicle for middle market companies in need of additional capital beyond what senior lenders are willing to offer, while maximizing total leverage with little equity dilution and little to no principal amortization.
Mezzanine debt provides more flexibility than traditional bank loans. Borrowers typically gain 4x or more in cash flow leverage, especially at the initial outset of the term of the loan.
How Cerebro Helps With Your Loan Options
Start Your Request
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No cost or obligation
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Takes just minutes
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Best lender matches
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Predictive
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Options for rates & terms
Get Funded
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Speak with our experts
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Select your loan options
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Receive your financing
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Join the thousands of mid-sized companies who have used Cerebro.
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Baltimore, MD 21201 - Cerebro Capital
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