What is mezzanine financing? Here is the text book definition:
Mezzanine financing is similar to a second mortgage; the main difference is that mezzanine loans are secured by a fraction of ownership of the project, as opposed to the real estate. If the principle defaults, the mezzanine lender can foreclose on the stock in a matter of a few weeks. If you own the company that owns the property, you control the property. So a mezzanine loan is secured by the stock of a company, which is personal property and can be seized much faster. Mezzanine loans depend on cash flow for repayment.
How do mezzanine loans work? They're written in such a way where the lender has ownership in the property or project. They are similar to second mortgages, but make it far easier for the owner to maintain ownership of the property without actually losing holistic ownership of it to the lender in the case of default. Since the property that was financed produces income, it is incredibly simple to use a portion of this cash flow to repay the mezzanine lender. Mezzanine lending for this reason is a popular option for landlords, gas station owners, and virtually any other type of commercial property owner.
Mezzanine financing allows you to have a loan default and keep your business too. Defaulting on the original agreement to pay back the original short-term loan is then extended to be paid off over time via the businesses already existing cash flow. This mechanism of the mezzanine loan operates as a fail safe against a foreclosure on the actual property.
Mezzanine finance is the best solution in almost all commercial lending scenarios. It is possible that a hard money loan, bridge loan, commercial mortgage, or some other commercial financing product is better suited to you. Mezzanine finance is part of a portfolio of commercial financing services than can be obtained through a good commercial financing broker. If you do not already have a commercial financing service firm working on your behalf, it might be time to find one.
Mezzanine financing is similar to a second mortgage; the main difference is that mezzanine loans are secured by a fraction of ownership of the project, as opposed to the real estate. If the principle defaults, the mezzanine lender can foreclose on the stock in a matter of a few weeks. If you own the company that owns the property, you control the property. So a mezzanine loan is secured by the stock of a company, which is personal property and can be seized much faster. Mezzanine loans depend on cash flow for repayment.
How do mezzanine loans work? They're written in such a way where the lender has ownership in the property or project. They are similar to second mortgages, but make it far easier for the owner to maintain ownership of the property without actually losing holistic ownership of it to the lender in the case of default. Since the property that was financed produces income, it is incredibly simple to use a portion of this cash flow to repay the mezzanine lender. Mezzanine lending for this reason is a popular option for landlords, gas station owners, and virtually any other type of commercial property owner.
Mezzanine financing allows you to have a loan default and keep your business too. Defaulting on the original agreement to pay back the original short-term loan is then extended to be paid off over time via the businesses already existing cash flow. This mechanism of the mezzanine loan operates as a fail safe against a foreclosure on the actual property.
Mezzanine finance is the best solution in almost all commercial lending scenarios. It is possible that a hard money loan, bridge loan, commercial mortgage, or some other commercial financing product is better suited to you. Mezzanine finance is part of a portfolio of commercial financing services than can be obtained through a good commercial financing broker. If you do not already have a commercial financing service firm working on your behalf, it might be time to find one.
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