Mezzanine and Cash Flow Loans
Mezzanine and cash flow loans in general can help to fill the void between senior debt and equity. These loans are geared towards companies that are near or have historical positive cash flow. The loan is subordinated to existing senior debt and while carrying a higher interest rate is often less expensive than equity. Loan can be used for many reasons, among which are growth and expansion, acquisitions, and refinancing of existing debt.
Razi will consider working with companies in a broad range of industries. Some of key factors that we seek in a potential client are a major equity stake by key management, a strong position in the company’'s industry, predictable financial performance, $10 million or more in revenues, and demonstrable ability to repay the loan.
One of the features of the mezzanine loans are that it is subordinated to a senior lender. Given the higher risk of such a loan, a potential upside is built into each transaction in the form of warrants or other forms of equity upside. The typical deal size under this structure is $3 million or greater. The debt has interest only payments of up to 5 years with the principal due at maturity.
In some cases, mezzanine loans have been used to finance part of acquisitions or leverage buyouts. They have also been used to replace shorter term amortizing debt with longer term flexible capital. In other cases, the debt has been used for large growth opportunities as growth capital.
- Strong management team
- At least $10 million in annual revenue
- At least $1.5 million in annual EBITDA
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