Sunday 14 July 2024
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How to use Mezzanine Finance to your Benefit

How to use Mezzanine Finance to your Benefit

Mezzanine loans are a viable financing option for small businesses and ventures that have come out of their incubation phase. Mezzanine finance is deemed as subordinated debt and more often preferred by the ventures that are looking for instant capital inflow.

A mezzanine financing deal is done when a lender provides a loan to a business and purchases its stocks at the same time. There is a perception that by securing mezzanine finance, businesses lose their independence and authority. However, that isn’t true. In contrast, there are multiple ways through which a small venture owner can use mezzanine financing to their benefit.

Make it a win-win situation

A smart business owner can transform mezzanine financing into a win-win opportunity. Oftentimes, creditors get repeatedly bothered by lenders even if business is doing well enough and there is no imminent threat of bankruptcy just because they want their money back.

On the contrary, if you are putting mezzanine finance into good use, then you won’t have to hear from the lender time and again. A better use of mezzanine finance will ultimately lead to an increment in the stock price of your venture which also benefits the lender.

With you, the lender is also making money and he will not like to interrupt that run by withdrawing the capital from your venture. So with a prospering business, you can return back the loan at your ease.

Learn from your lender

Lenders of mezzanine finance are often experienced investors who have worked long enough to understand the intricacies of the field. By developing a better working relationship with them, you can get the insight which will enable you to make better decisions. A better strategic guidance has undoubtedly very useful for ventures vying to take a big takeoff.

Furthermore, majority of mezzanine lenders have long-term objectives which mean you can use this extended time window to execute your own vision. Stamford Capital Australia can help in brokering your deal with experienced investors/lenders of the realm.

Use it to expand your operations

Terms and conditions of some business loans oblige the creditor with the use of borrowed money. With mezzanine financing, you are not bound to any such compulsion. You can channel the borrowed capital in any direction of your choice. Acquire another venture or increase your production, it’s up to you how you want to move forward with mezzanine financing.

You can use the model of mezzanine finance as a bargaining chip

To expand your business operations exponentially, you will need a pool of investors. If things go as intended and your business is growing and burgeoning, then the structure of mezzanine finance can be used as a good bargaining chip to get in more lenders. The prospect of getting interest while profiting from increasing stock prices will help you to take more investors on board which will consequently aid in generating a sizable capital stream for your ambitious future plans.

As you can see, not all loans are dreadful for borrowers and mezzanine financing is certainly not one.