In many cases, coming up with a little extra capital to infuse into your business can make the difference between succeeding long term and failing immediately. For those looking for some funds to help a business grow, mezzanine debt UK can help immensely. When you get one of these loans, you have an agreement set up with the lender where you will repay the money at the end of the term. You also do not have to put up any collateral, making it a less risky manner in which to borrow money. Keep in mind that this loan is more risky for the lender, so they do require you to agree to a higher interest rate.
One thing to remember about mezzanine debt is that the lender can take shares in your company if you default on the loan. The exact specifications will be determined by the lender, depending on the loan size and term. If you do default on your loan, the lender can take these shares of your company to regain its money. You have the option of purchasing these shares back from the lender for a predetermined price. The lender in this situation has no desire to gain interest in your company, as this deal is usually based on the money. Therefore, as long as you repay your loan, you will not have to give up any part of your company to get these funds.
Mezzanine debt in the UK differs from an equity loan because you do not have to give up part of the company to get this money. With an equity loan, your lender will want some stake in your company, in exchange for capital. You might have the option to buy these stakes back from the lender later on, but it is not guaranteed. Many people do not like equity loans because the lender often wants to gain control of the company. Therefore, you should avoid these loans unless you know that it will turn out in a desirable manner.
If in the UK consider mezzanine debt the next time you need some extra capital to expand your company. These loans can be used for advertising, purchasing a larger office space, funding a leveraged buyout or just about anything else involved with the expansion of your business. Many business owners prefer these loans over bank loans, since bank loans must be paid off month by month. With mezzanine debt UK, you can pay the entire amount plus 20 to 30 percent back at the end of the term. This prevents you from having to take money away from your company’s growth fund before it is ready.