Mezzanine Financing
A hybrid of debt and equity financing, typically unsecured, that sits between senior debt and ownership equity and often converts to an equity stake if not repaid on time.
Because mezzanine financing is subordinated to senior debt and usually unsecured, it costs more than a traditional loan, but it doesn’t require the same collateral, and it’s structured to give the lender an equity conversion option or warrants as additional upside.
It’s most common for larger transactions, like funding a business acquisition or a major expansion, where a company has already used up its senior debt capacity but doesn’t want to give up as much ownership as a straight equity raise would require.
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