Different kinds of financing

A hybrid of loan and capital ways of financing is typically used in order to fund the expansion of some companies that already exists with their somewhat successful business model. Mezzanine financing is in plain explanation a debt equity that provides the executives with the rights to transform it to an ownership or capital interest of the company in case the borrowed money is not returned in certain period of time and in its full amount. It is generally an obligation of a loan (debt) provided by senior executives such as strong capital companies or any kind of financial institutions. Because this financing is often provided to the borrower for a very short period of time, with small due studiousness on the part of the executives and little or no pledge on the part of the one who is borrowing the money, it is usually highly priced with the executives looking to return the money in the 20-30% interest range over the original, borrowed amount. Of course, this kind of financing has its advantages because it is provided as capital on the company’s credit sheet and it can make it leisurely to obtain standard bank financing. In order to make this kind of financing appealing, the borrowing company is usually forced to demonstrate a history record in the industry with an repudiated product, a written tracks of profitability in it, as well as a well directional plan of  business extensions, for example, to some other markets and such.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s