What is mezzanine finance?
- A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is generally subordinated to debt provided by senior lenders such as banks and venture capital companies.
- Since mezzanine financing is usually provided to the borrower very quickly with little due diligence on the part of the lender this type of financing is aggressively priced with the lender seeking a return in the 20-50%p.a. range.
When to use it?
- Mezzanine finance is raised by property developers to finance large scale property developments such as building residential units. Mezzanine finance is used in conjunction with bank loans and the property developer’s own equity to fund the development. In the event that the developer goes bankrupt, mezzanine finance investors stand second in line to the banks to receive their dues, hence explaining the higher rates of interest offered.
- The risk with mezzanine finance hinges on the credibility of the property developer, property market conditions and the particulars of the contract.
Why use Naritas?
- Market leading processes & technology powering the fastest approval times.
- Extended support hours & our leading edge customer service system equipping you with access to our mobile apps, support portal and live chat for access to advice & support when and where you need it.
- Advisers & staff that you can trust that are experts in their field.
- A track record of successful outcomes for our clients that sees them return to us as opposed to going to the lender directly.
- Access to most of the best loans, with the cheapest rates from a huge variety of Australian lenders.
- Value adds such as free valuations, custom engineered advice and dedicated support for the life of your loan.
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