Mezzanine financing is commonly referred to as "bridge financing" or a bridge loan. When a business opts for mezzanine financing they are usually seeking money for immediate cash needs to help them pay bills and manage gaps in their cash flow. In order to acquire mezzanine financing, you need to have a strong cash flow and show the bank that you are a credible and worthy borrower. If the lender is comfortable with your monthly sales numbers over a period of about 120 days or less, they will be able to offer mezzanine financing and help you fill in any gaps that may arise due to seasonal sale problems.
Mezzanine financing generally uses your invoices to secure the loan. You will take a summary of the invoices over a given time and the lender will provide you with up to 75% or the value of the invoices. It is also called credit card lending or invoice factoring. This is a great way to quickly improve your cash flow and strengthen the overall financial position of your company.
While mezzanine financing looks attractive, it does come with some issues like the incredibly high interest charge. Lenders know you need this money and that you are desperate to bridge the gap. Because of this they want to be paid generously for coming to your rescue.
The other issue you face with mezzanine financing is finding a lender to offer you the money. Depending upon your business credit there are going to be some lenders that may be nervous about offering you the money. They may not see the value in your cash flow and will only focus on the problems that they see in the immediate future for your business. So where can you turn for mezzanine financing if traditional lenders just aren't going to be there for you? The answer is equity investors. Equity investors love to provide money if they see potential in your business and a chance to make a nice profit.
What happens if you are in a bind for the money now and you don't have time to wait for lenders and investors to deal with the stock sale and paperwork? Is it possible to acquire mezzanine financing without jumping through traditional lending hoops? Fortunately the answer is "yes". You can easily acquire what is known as a short-term bridge loan. This will offer you the money you need to quickly fix your problems so you aren't stuck waiting around for weeks to acquire the money.
Dealing with mezzanine financing can become a hassle so its always a good idea to hire a CPA to help you out. They can deal with the negotiations for a fair interest rate and many other things that will help you take your business to the next level if you can acquire the funding. They will also be able to step in and provide you with solid financial advice pertaining to your businesses cash flow needs, growth, and stock.
Whenever you are trying to acquire any type of financing for your business, you know you have a large obstacle to overcome. Get all your paperwork ready to make the entire process easier. You need to acquire essential documents like your recent bank statements, cash flow projects, tax returns, and your business plan. Having all of this information at hand and ready to pass over to the investor or lender will speed up the approval process and it may be easier to acquire the financing. Read over your business plan and update it in order to make sure it is accurate for what your business is trying to accomplish now and in the future.
Corporate Credit Concepts specializes in mezzanine financing. For more information about mezzanine financing and how it might benefit your business, please CLICK HERE for a free phone consultation.