Mezzanine financing sits between senior debt and equity. For many mid-market companies, it is the missing layer that makes a growth plan, acquisition or buyout possible without handing over control. When used with discipline, mezzanine capital can support large transactions that senior lenders will not fund on their own, while avoiding the dilution that comes with a full equity round.
As private credit markets expand, mezzanine lenders now provide capital across sectors and geographies. Banks focus on first ranking, asset-backed loans with tight covenants. Equity investors push for ownership and board control. Mezzanine capital fills the gap, giving companies an additional source of long-term funding that can be tailored to their cash flows and strategic goals.
This guide explains what mezzanine financing is, where it sits in the capital stack, how transactions are structured, the main use cases and how businesses can assess whether it is the right tool for their plans. It also outlines how Financely Group works with sponsors and management teams to access mezzanine funding from specialist lenders and private credit funds.
Mezzanine financing is a form of subordinated capital that combines features of debt and equity. In a liquidation, it ranks below senior secured loans but above ordinary shareholders. In return for taking this intermediate risk, mezzanine lenders earn a higher return, often through a mix of cash interest, payment-in-kind (PIK) interest, fees and equity-linked instruments.
In a typical capital stack, the layers might look like this:
Mezzanine capital often includes:
Lenders offer mezzanine financing because it allows them to support attractive businesses where senior loans alone cannot provide enough funding or leverage would be excessive at senior level. For companies, mezzanine is usually considered when:
Mezzanine capital is most effective when there is a defined event, growth plan or project that will increase earnings and enterprise value. Common situations include:
One of the main attractions of mezzanine capital is that it provides substantial funding while limiting dilution. Instead of raising the full amount as equity, existing shareholders can combine a smaller equity contribution with senior loans and mezzanine. They retain more of the upside if the plan succeeds, even after sharing some value with mezzanine lenders through interest and equity kickers.
Mezzanine structures are designed to be more flexible than bank loans. They may combine:
This flexibility reduces pressure on cash flow during the initial years of a growth plan or acquisition integration, when earnings may be volatile or working capital demands are high.
Mezzanine capital allows companies to complete transactions that would otherwise require a far larger equity cheque. For example, in an acquisition where senior lenders are comfortable at 3 times EBITDA and the purchase price implies 5 or 6 times, mezzanine can bridge part of the gap, avoiding an oversized equity transaction.
When structured intelligently, mezzanine financing can improve liquidity and resilience. It can refinance short-dated facilities, extend maturities and smooth amortisation profiles. For sponsors with multiple portfolio companies, it can free up capital at holding level while keeping a balanced risk profile in the operating business.
Mezzanine is usually layered on top of senior loans, not used as a replacement. Senior lenders keep their first ranking security and tighter covenants. Mezzanine lenders accept a subordinated position but earn a higher return. The combination allows more overall funding without putting all risk on one lender group.
While every deal is bespoke, mezzanine transactions share common structural features. Understanding these elements helps management teams and sponsors negotiate terms that fit their needs.
The core of a mezzanine deal is a subordinated loan or note. It may be unsecured or secured by second-ranking claims behind senior lenders. In a downside scenario, mezzanine is repaid only after senior lenders are made whole, which is why pricing is higher.
To enhance returns, mezzanine lenders often receive equity-linked instruments, such as:
These instruments align the lender with the company’s success and compensate for the subordinated risk they are taking.
Mezzanine facilities typically run for five to seven years, sometimes longer in project-backed settings. This gives companies time to execute their growth plans, integrate acquisitions and build cash flows before refinancing or repaying the facility.
Compared with senior bank loans, mezzanine facilities often contain fewer and more tailored covenants. While lenders still monitor leverage, coverage and cash leakage, they may accept looser thresholds or covenant holidays in early years in exchange for pricing and structural protections.
| Structural Feature | Typical Mezzanine Approach | Practical Implication |
|---|---|---|
| Ranking | Subordinated to senior debt, ahead of equity. | Higher return than senior loans, but less risk than pure equity. |
| Tenor | Around 5 to 7 years. | Aligns with growth, acquisition or project timelines. |
| Repayment | Bullet or light amortisation, with cash and PIK interest. | Reduces early cash drain so the business can reinvest in growth. |
| Covenants | Financial and structural covenants, usually less restrictive than senior. | More room to manage short-term volatility, but still discipline on leverage. |
| Equity Component | Warrants, options or profit share. | Allows lenders to share in value upside without owning the company outright. |
Mezzanine lenders back businesses with a clear story, predictable earnings and credible leadership. It is rarely suitable for early-stage companies with volatile revenue or unclear profitability. Strong candidates tend to share several traits:
Industries that often use mezzanine financing include business services, manufacturing, technology and software, healthcare, consumer brands, logistics and selected infrastructure and real assets where cash flows are visible.
Sourcing mezzanine capital is not only about contacting a list of funds. Each lender has specific criteria on sector, geography, deal size, instrument type, leverage levels and governance. A company that fits one fund’s focus may sit outside another’s mandate. Navigating this map alone can cost time and weaken negotiating leverage.
Financely Group works with businesses that need mezzanine capital for acquisitions, growth plans and recapitalisations. Through regulated partners, we have access to specialist mezzanine lenders and private credit funds that provide tickets from about USD 5 million into the hundreds of millions for suitable transactions.
On each mandate, we:
The objective is not only to receive indicative terms, but to secure committed facilities that align with the company’s strategy and can withstand due diligence.
Mezzanine financing makes sense when a company has a clear plan that will increase earnings and value, senior lenders have reached their limits and shareholders are unwilling to give up large stakes. It does not replace senior loans or equity, but it can complete the funding picture for the right transaction.
If you are considering a significant acquisition, buyout, expansion or recapitalisation, a structured mezzanine solution may allow you to move faster while keeping control. Early engagement with advisers and lenders helps test feasibility and refine the structure before you commit to binding deals.
Share your company profile, transaction outline and funding requirements with our team to explore mezzanine capital options from specialist lenders and private credit funds.
Submit Your Mezzanine Funding RequestDisclaimer: This page is for general information only and does not constitute legal, tax, accounting or investment advice. Financely Group acts as advisor and arranger through regulated partners and is not a bank or direct lender. Any mezzanine financing, loan, security or capital raising structure is subject to underwriting, KYC, AML, sanctions screening, legal review, documentation, perfected security and approvals by relevant stakeholders. No public offer or solicitation is made on this page.
Submit your deal using our secure intake form, and receive a quote within 1-3 business days. Existing clients can connect with their relationship manager through our secure web portal.
All submissions are
promptly reviewed, and all communications are conducted through the intake form or the client portal for a seamless and secure process.
Thank you for considering working with us. A nominal fee of US$500 is required upon completion of each form. This fee covers the time and effort we invest in reviewing your submission and crafting a thorough proposal. We receive numerous inquiries and prioritize those that carry this fee, ensuring serious applicants receive prompt attention.
Tap into solutions like letters of credit, bank guarantees, and payment facilitation. We address the challenge of global transaction risk through structured strategies that foster cross-border growth. Complete the form to unlock streamlined funding aligned with your commercial objectives.
Submit a RequestAccess non-recourse funding for infrastructure, renewable energy, or other capital-intensive ventures. We mitigate capital constraints by isolating project assets and focusing on risk management. Provide your details to receive a structure that drives growth and maximizes returns.
Submit a RequestSecure financing for business or real estate acquisitions. We ease transaction hurdles by reviewing cash flow, synergy opportunities, and exit plans. Complete the form for a customized proposal that supports your strategic investment objectives.
Submit a RequestFinancely assists banks facing Basel III pressures by distributing trade finance deals and providing collateral for letters of credit. We reduce capital burdens while preserving client relationships and fostering service expansion. Submit your request to optimize your trade finance offerings.
Submit a RequestOnce we receive your submission, our team will review your information to determine feasibility. If eligible, you will receive a proposal or term sheet within 1–3 business days. Visit our FAQ and Procedure pages for more information.
Disclaimer: Financely provides financing based on due diligence and feasibility. Approval is not guaranteed, and past performance does not predict future outcomes. All terms are subject to review. Financely primarily assists with structuring and distribution. Qualified parties carry out the project if the client approves the proposal.
Financely advises growth-focused businesses on accessing capital by introducing their opportunities to professional investors. Financely is not a securities broker or dealer. Where appropriate, engagements are coordinated with regulated broker-dealers, investment banks, legal counsel, and other specialists.
Financely does not solicit, offer, or accept orders to buy or sell securities and makes no assurance regarding capital-raising outcomes.
Services are strictly business-to-business. Financely does not provide personal finance, consumer credit, or retail advisory services.
Advisory services are reserved for post-revenue companies that recognize the time and resources required for professional underwriting.
All mandates start with an RFQ. We review submissions, issue a brief Go/No-Go memo, and where bankable, release a Term Sheet that leads to funding. We arrange capital across Senior Secured, Unitranche, Second Lien/Mezzanine, Preferred Equity, and Gap Solutions. We do not process deals by email or chat.
Letters of Credit, Standby LCs, Confirmations, Receivables Finance, and Inventory Lines with control.
Funding arranged for trade flows with instruments sized to your cycle and aligned to delivery and settlement.
Move forward to secure working capital and keep goods moving. Submit the RFQ to start underwriting for funding.
Limited or non-recourse structures for energy and infrastructure with lender-ready materials.
Funding solutions aligned to project cash flows with credible covenants and conditions to reach notice to proceed.
Advance the file to termable status. Submit the RFQ so we can underwrite and secure funding.
Debt and Preferred solutions anchored on cash flow, Quality of Earnings, and clear closing mechanics.
Funding across senior, unitranche, and preferred to match stable cash flows and acquisition timelines.
Get financed on workable terms for closing. Submit the RFQ to start underwriting.
Acquisition, development, bridge, and refinance with lender-ready packs and third-party reports managed.
Funding calibrated to DSCR, leverage, and tenancy with terms designed to close.
Move to a financeable package. Submit the RFQ to initiate underwriting for funding.
KYC and Source of Funds required. Engagements are best-efforts and subject to underwriting. Preference for operating companies with meaningful revenue. See our FAQ and Procedure.
Financely Inc. (“Financely”) provides corporate-finance advice and is wholly owned by Aurora Bay Trust, a trust formed under Bahamian law, together with its authorized affiliates. Depending on deal structure, jurisdiction, and local rules, engagements may be carried out through Financely Group LLC, a non-deposit-taking, non-banking financial company; Ashford Capital Advisory LLC; or another related entity.
Financely and its affiliates are not registered as securities broker-dealers and do not execute securities transactions or hold client funds or securities. When a mandate involves the purchase or sale of securities and a registered intermediary is required, any orders are introduced to and executed by one or more independent U.S. broker-dealers registered with the SEC and FINRA. Those broker-dealers are solely responsible for trade execution, custody, and related regulatory obligations. Nothing in this material constitutes an offer, solicitation, or recommendation to buy or sell any security or to engage in any specific transaction. Before engaging Financely Group LLC, Ashford Capital Advisory LLC, or any affiliate, you are responsible for confirming that such engagement complies with your own legal, regulatory, tax, and other requirements. In the United States, certain advisory activities may be conducted in reliance on exemptions available under the Investment Advisers Act of 1940, including the “foreign private adviser” exemption where applicable. Our services and regulatory status may vary by jurisdiction and by transaction type.
Click
here to download our brochure.
