There are several different types of private equity investments. These include Mezzanine financing, Leveraged buyouts, and Private equity real estate. Depending on your needs, there may be one or more types of private equity for your business. Read on to learn more. Listed below are a few examples of each type of private equity. They may not be right for your business, but they can help you navigate through the financing process.
Mezzanine financing is the process of raising additional capital for a small business that needs more funding than it has in hand. The loan is generally subordinate to other types of debt. If the company goes bankrupt, its senior creditors will recoup their losses first. Then, the mezzanine lender will walk away as a failed opportunity. However, mezzanine lenders have certain advantages over other types of financing.
The typical structure of mezzanine financing involves unsecured subordinated debt with a “kicker” of equity in the form of warrants for common stock. Unlike venture capital, mezzanine loans typically do not require any equity from the borrowers, which makes them a good choice for many smaller businesses. Most mezzanine loans are also conditional on a bank loan, and the percentage of equity that the owners surrendered will be minimal – typically between 5 percent and 15%.
Mezzanine financing has a long history in the US. In the 1980s, savings and loan companies dominated the US debt market. But in the 1990s, hedge funds, boutique banks, and private equity firms … READ MORE ...