Those interested in mezzanine finance in the UK should probably learn a little bit about how the process works beforehand. This is different from both a debt loan and an equity loan, although it does contain elements of both. When attempting to expand your company, you might want to have some extra capital on hand. Coming up with this capital can bring difficulty in some situations, especially if you want to avoid going public. For companies that find themselves in this situation, a mezzanine loan could solve the problem immediately by creating an influx of cash immediately.
When you look into mezzanine finance throughout the UK, the first thing to consider is the state of your company. Lenders are looking for companies with the ability to grow substantially within the next five years. This is how lenders get their money back, so it is essential to receiving this type of financing. In this scenario, the lender does not ask for collateral or stake in your company, which is good for the company’s overall prospects. What the lender does want, however, is to charge you a higher interest rate and to have contract written up giving the lender stake in your company if you default on the loan.
This is a great option for many businesses because it eliminates some of the problems involved with a bank loan. If you borrow money from the bank, you will have to provide some of your company’s assets as collateral. In addition, you will have to make monthly payments on your loan until you have it completely paid off. This means that a percentage of the capital that has been put into your company must be paid back each month. With mezzanine finance in the UK, you do not have to provide collateral and can pay the entire loan back at the end of the term.
Mezzanine finance also eliminates some of the problems involved with an equity loan. When you go through with an equity loan, it involves giving up some control of your company. Most lenders who give these types of loans are looking for this control, which is not good for your long-term prospects. While you will receive the capital that you need, it could end up eventually costing you control of the company that you have worked so hard to build.
While dealing with mezzanine finance especially in the UK it might cost you more within the next few years, it allows you to continue to grow your company for the foreseeable future. You will not have to worry about losing control of the company, so you can work on other things like turning it into a major success for all involved.